In order to trade in a new market, the trader must know and understand the core concepts on which the foundations rest. If he/she lacks the basic knowledge about the respective market, it can result in huge losses. Here are few basic facts and tips on the foreign exchange market or the forex market.
What is Forex?
Forex is a market where the traders rest their investments on currencies. All around the world, currencies are exchanged every instant, and this makes forex market one of the largest markets in terms of volume and turnover. One of the main characteristics of forex is that it is decentralized and it operates online.
Citing an example, if a U.S.A. citizen wishes to visit England, he has to get his dollars exchanged for Euros, as dollars cease to be a mode of payment in the markets of England. Since one Euro is costlier than one US dollar, he has to pay more than one dollar to get one euro in exchange. This helps the trader in the dynamic forex market to achieve profits.
It is said that the forex market is sleepless, as it operates round the clock, twenty four hours in a day and five days a week.
What are exchange rates?
Exchange rate is “the value of one currency for the purpose of another.” There are a lot of fluctuations in the currency value of a country and these fluctuations are primarily affected by political changes, economic developments and other events concerning the respective countries. Seldom does the value of two currencies remain constant for a long time. Example: Exchange rate of Euro to dollar is $1.12. This means, in order to buy one Euro, one has to pay a sum of 1.12 US dollars.