Learn the basics of forex trading, how to trade and the role of leverage in forex.
Forex, or foreign exchange, is a marketplace where currencies are bought and sold at agreed-upon prices. It enables individuals, businesses, and central banks to convert one currency into another. Whether you are a seasoned trader or just starting out, understanding forex trading can significantly increase your financial knowledge.
Much of forex trading is driven by profit-seeking despite its common roles in global commerce and financial transactions. The significant daily trading volume transacted can cause substantial price fluctuations. This volatility attracts traders seeking potentially lucrative opportunities, but it also entails heightened risks.
The Forex market is unique, and here's why:
Spot forex market |
Currencies are exchanged immediately or within a short period of time after the trade is agreed upon. Hence why it is called "Spot" because it occurs right on the spot. |
Forward forex market |
Contract is made to buy or sell a specific amount of currency at a fixed price. This transaction is settled at a future date. |
Future forex market |
A contract to buy or sell an amount of currency at a predetermined price and date in the future. Unlike forwards, futures contracts are legally binding agreements. |