Forex trading, short of foreign exchange, is the selling and buying of currencies. Each currency in a pair is represented by a three-letter code. They’re normally formed by two letters that signify the region and the last letter that signifies the name of the currency. For example, AUD stands for the Australian dollar.
It’s Common To See Currency Pairs Split Into The Following Categories:
- Major pairs - those that are the most frequently traded around the world.
- Minor pairs - those less frequently traded, it does not include the US dollar.
- Cross pairs - those less frequently traded, again do not include the US dollar.
- Exotics - those that are a major currency against one from an emerging economy.
How Does Forex Trading Work?
Transactions are completed across the four forex trading hubs around the world. They’re Sydney, Tokyo, London, and New York.
The trading takes place in an over-the-counter (OTC) market and run by networks of banks and brokers, which means that there is no centralized exchange. As there is no centralized location or exchange like for example the New York Stock Exchange (NYSE), it’s possible for you to trade 24 hours a day, 5 days a week.
It’s common for there to be no actual or physical delivery of the currency in retail trading as you trade derivatives of the exchange rate. This makes it easy for almost anyone to participate in forex trading and profit on correctly predicted price movements.
How To Read Forex Pricing:
The first currency listed in a forex pair is called the base currency, and the second currency is called the quote currency. The price of a forex pair is how much one unit of the base currency is worth in the quote currency. So if EUR/USD is trading at 1.10041, then one euro is worth 1.10041 dollars.
Ultimately this means if the euro rises against the dollar, then a single euro will be worth more dollars and the pair’s price will increase. If it drops, the pair’s price will decrease.
How Should I Trade It?
If you think that the base currency in the pair is likely to strengthen or appreciate against the quote currency, you can buy the pair, otherwise known as going long. If you think it will weaken or depreciate, you can sell the pair, otherwise known as going short.
How Do I Start Trading Forex With Baxia Markets?
Baxia Markets is pleased to offer our clients a versatile porfotlio of trading instruments including Forex, CFDs, Cryptocurrencies and Indices. You can start trading Forex with Baxia Markets by opening a live account here.