However, rather than physically exchanging the two, traders lodge a “buy” or “sell” order with a broker. In a forex transaction, the investor is understood to be exchanging one currency for the other. The second currency is the quote currency and indicates how much of that currency is required to buy 1 unit of the base currency. The first currency in the currency pair is the base currency. Some examples of currency pairs are set out below: The 2 currencies involved in the transaction are known as currency pairs. When talking about forex trading for individual traders, most people are referring to a set of instruments that are traded on the retail forex market, and which allow people to profit from currency movements without actually owning or holding foreign currency at any stage of the transaction.įorex trades always involve 2 currencies.
The forex market is large and complex and involves many different players, both institutional and individual. Read on to find out more about global currency trading.įoreign exchange trading (also known as forex, FX or currency trading) refers to exchanging currency with the goal of making a profit on the exchange rate between 2 currencies. While it’s a highly liquid marketplace which basically enables traders to trade currency pairs round the clock, it can be confusing to new participants. The global foreign exchange market is the largest financial market in the world. While we receive compensation when you click links to partners, they do not influence our opinions or reviews. Finder is committed to editorial independence.
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