What is Forex Trading?

This is the most common question of every beginner-What is forex trading and What is forex trading about? This can be simply mentioned as trading one currency for another. This can be an investment or a need to trade. Or if you want me to say in technical words “Forex or Foreign Exchange is a huge global market where big organizations like banks, businesses, governments, investors and retail traders(like you and me) come to exchange and speculate on currencies.”(I think a simple answer was better to understand)

Every country has its own accepted currencies. Have you ever traveled to any country? If you have traveled, you might have already traded forex. Yes, you might have exchanged your currency with the target currency for your local expenses. Every currency has its own value and this makes the forex market the global market.

Just imagine if you have alone exchanged your currency with other currency once or twice, can you guess how much currency is being exchanged every day around the globe?

There are more than Trillions of dollars worth of currency change hands each day between traders, banks, corporations, and countries. These currencies are traded 24 hours a day and 5 days a week. There are 170 country’s currencies traded over the counter daily.

All these currencies are traded in pairs. Lets us assume that You have $1000 bucks of USD in your hand and you believe Euro value might raise compared to USD. You will purchase an equivalent amount of Euro with the USD you have. Your guess was right and the Euro price moved up by 10% and the Euros you have yielded 10% more USD for you.

The major currencies like USD, EUR, JPY, GBP, AUD, CAD, CHF, CNY, HKD and NZD contribute the majority of trade volume every day.

There is no central marketplace for the Forex market. Forex is not traded similar to stocks. The volume of money exchanged in the forex market is 10 times more than the huge stock exchanges like NYSE. The forex currencies are traded by Sessions Sydney, Tokyo, London and New York. As one session overlaps with others during other session’s end, this will allow forex traders to trade round the clock.

Why forex is preferred by many traders over stocks?

I was one of the stock traders who loved to trade stock, but now I prefer trading forex. Why?

The volatility in forex is high creating opportunities for us to trade the currency at specific prices. Stock markets open when I go to work and closes before I am back home. But Forex markets run 24X5. You can trade whenever you are free or you find an opportunity.

Confidence is not “I will profit on this trade.” Confidence is “I will be fine if I don’t profit from this trade.”

-Yvan Byeajee, The essence of trading psychology in one skill

Forex markets are highly volatile markets where you can “Expect the unexpected profits” if the trades go well. The forex markets are bigger than any other market. As of 2019, the forex turnover was more than 17times of global GDP. In the end, you might wonder if forex trading is helping in making real money and is forex trading legit? Yes, you can make money with forex trading and the legit of forex trading depends on the broker you chose to trade with. The profitability factor depends on the Plan or strategy you are using in forex trading.

Have you ever traded forex? What was your experience?