Forex stands for foreign exchange market. This market is one in which a nation’s currency is traded for that of another at a mutually agreed rate. Online Forex Trading market is running electronically within a network of banks.
Global Forex industry is the most liquid market in the world. If you have ever visited overseas then you have experienced forex transaction. For an example suppose you have visited France and thus you have converted your pounds into euros. When this exchange thing happens between these two currencies based on the supply and the demand of this two currency. And this determines how much euros you will get exchanging your pounds. And this is how online forex trading works.
So just like stocks you can trade with the currencies. If you think that the currency value will increase, you can buy it or if you think that the value of the currency will decrease you can sell it as well.
How to make a deal
So for this forex deal, there must be two currencies as you are betting on the currencies against another.
- Let’s take EUR and USD, mostly traded currency pair amongst people will have a market price. So in this currency pair, the first one is called base and the second one is called as a counter.
- Now when you see price quotation on your platform, you need to tally the two currency that the price is how much for EUR and how much for USD. You need to check this two price always as one of the prices is buying price and the other is selling. And the difference between these two is spread.
- Now assume that you think euro value will increase against US dollar, so your pair is EUR/USD. So here EUR will go high and you will buy EUR/USD. If you think the EUR value will drop then you will sell EUR/USD.
In this way, forex trading happens. If you want to have a demo session you can open a free demo platform.