What is Foreign Exchange Market?
This account looks at what the foreign exchange market is and how you can make money from it.
The question “what is foreign exchange?” is one that must be answered if you are looking at the foreign exchange market. It is only by understanding what foreign exchange is that you can start to understand how the market works and how you can use it.
What is Foreign Exchange?
The answer to the question “what is foreign exchange?” is actually quite simple. Foreign exchange is the global practice of exchanging the currency of one country for that of another. There are a number of ways this can be done. You can exchange currency through banks, travel agents or use the foreign exchange market. Of course, if you decide to use the foreign exchange market you will not actually have any physical currency.
What is the Foreign Exchange Market?
Now that you know a bit more about what is foreign exchange, you need to look at the forex market. This market is where traders come together and trade currency pairs. However, it should be noted that this market is not like the stock market. The forex market does not have centralised exchanges in different countries, and can be traded at any time of the day. There are also a number of other points which make the foreign exchange market different:
The Market Size
The size of the forex market is one of the points that set it apart from all others. This market is the largest financial trading market in the world, trading over a trillion dollars every day. The market also allows for the trading of every currency in the world as part of currency pairs.
Who Can Participate?
The foreign exchange market is open and accessible in a way that most other financial markets are not. With the stock market you will need to have a broker buy and sell your stocks. However, with the forex market, you are able to do this yourself. Forex can be traded by anyone with an internet connection and money to put in a brokerage account.
To trade, you need to have a trading platform, and these are usually free when you sign up with a broker. Once you have the platform you simply put money into your trading account and start trading. You do not even have to have a large capital amount like when you trade stocks. Most brokers will allow basic trading accounts for people who deposit as little as $10.
How do you Make Money?
When you know more about the forex market you will wonder how exactly you are making money off it. The basic principle is to buy low and sell high. The profit you make between these prices is all yours. The reason you can make money on this market is down to the fact that the value of currency fluctuates. This fluctuation causes highs and lows in the price. If you are able to get a currency while it is low and sell it when it is high, you are taking advantage of the opportunity given. Once you have reached a certain amount you can withdraw your profits from your trading account.