What is Forex

Forex- Foreign Exchange

The foreign exchange market (FOREX Market) is the World’s biggest O-T-C market in the world. There are multiple locations where transactions are placed. The market is open 24 hours a day and it records trading volumes of more than $5 trillion per day. Also Forex market is the most liquid market in the World. Basically, you buy one currency and sell the other for the purpose making profit. The main goal is to make a profit when the exchange rates of the currencies traded move as per your speculation. More than 90% of all currencies are traded against the US Dollar (USD).

What is Foreign Exchange?

Foreign exchange refers to exchange of currencies. The FX market is the place where different currencies are traded. The foreign exchange market is the “place” where currencies are traded.

Why Forex Trading?

Following are some specification of FOREX market.

• OTC (Over the Counter market)
• 24 hours market
• High Liquidity

Major participants in FOREX market

Following are the major participant in FOREX market 

• Financial Institution
• Corporates
• Banks
• Government
• HNI (High net worth individuals)
• Hedge Fund
• Mutual Fund
• Pension Fund
• Insurance Companies

Famous currency symbol and Pair

Basic Terminologies in Forex Market

Bear market- A market where prices are falling.(Negative market for trading)

Bull market- A market where prices are raising. (Positive market for trading)

Ask price– The Ask price is the exchange rate at which a currency can be bought or the current lowest price at which you could buy the currency.

Bid price- The Bid price is the exchange rate at which a currency is offered for sale or current highest price at which you could sell

Spread- Difference between ask and bid prices for a currency pair.

Aussie- Forex slang name for the Australian dollar.

Cable- Slang word for GBP/USD currency pair.

CFD- Contract for Difference — special trading instrument that allows financial speculation on various instrument without actually buying.

Floating Leverage- Leverage that changes depending on the total size of open positions.

Jobber- Slang word for a trader which is aimed toward fast but small and short-term profit from an intra-day trading.

Kiwi- Slang name for the New Zealand currency

Long – To Buy. In Forex, currency when bought is long and another is short.

Lot- It represents the minimum quantity which can be traded in any given instrument. Definite amount of units (usually it is a multiple of 100).

Margin- The investor needs to maintain minimum amount at broker account to execute trades.

Margin Account- Account which is used to hold investor’s deposited money for FOREX trading.

Pip- This is the smallest value in a currency quote and can be different for different currencies. Most currency pair quotes are carried out four decimal places—i.e. 1.4500. The last decimal place is called a pip

Pip Value- The pip value can be either variable or fixed, depending on the currency pair it refers to and the base currency.

Leverage- Leverage is the ability to gear your account into a position greater than your total account margin.

Slippage- The difference between execution value of the order and the ordered value. It occur when the market is extremely volatile and the exchange rate changes every second.

Stop loss- The order that limits your risk on a transaction. Applying a stop loss order will ensure that you don’t lose more money than price specified on a transaction. – it is used to limit potential losses on your open position if the market moved against you.

TOD trade- Allows applying for currency exchange upon the exchange rate of the date when the order is executed. All the transactions are executed at the same day.

TOM trade- It allows you to sign a buy or sell contract a day before the date of execution.

SPOT trade- Transaction is similar to TOM; however the order will be executed on the third day after the Bank and the Client have signed the agreement.

List of some currency with their country name