Forex market : signification
Forex market is a term that refers to the currency market. This is the contraction of FOReign EXchange. Each currency is exchanged for another and this is why we are talking about a currency pair. The exchange rate varies constantly according to the supply and demand between the different players : banks, institutionals, central banks …
The Forex market is the largest market in the world but also the most popular. A tremendous number of transactions is made every day that is estimated to be over $ 4,000 billion every day.
Forex Currency Pairs
As mentioned above, the Forex trades in currency pair. Each is recognized by a three-letter currency code, for example EUR / USD (euro against US dollar), or GBP / USD (sterling pound against US dollar). The base currency is the first indicated, it is also called the primary currency. The second currency is called the counterparty. So if we take as an example that the GBP / USD trades at 1.64752, that means that 1 sterling pound equals 1.64752 US dollars. So for buying 1 sterling pound it is necessary to sell 1.64752 dollars and in the contrary case, if one sells a pound one receives 1.64752 dollars.
The main advantages of the foreign exchange market
The main advantages of the Forex market are the exceptional liquidity but also the fact that it is open 24/24 from Sunday evening to Friday evening. One can also, according to his feeling buy or sell a pair of currency. In the case of a purchase this is called taking a long position and in the case of a sale this is called taking a short position. If we take the example of the GBP / USD, if we think that it will appreciate above 1.64752, in this case we will buy and we will take a long position. If, on the other hand, we think that it will depreciate below 1.64752, we will take a short position.
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