What is forex trading and how does it work?

What is forex trading and how does it work?

Forex trading is something that is known as the transaction of selling a currency in exchange of buying another currency. This is the market that determines the foreign exchange rates for each currency. Not only this, but it also includes every aspects of buying, selling or even exchanging currencies at a current or even any of determined rates.

Trading market is one of the largest market across globe which comes after credit market. Apart from this, you must know that the currencies are always exchanged in pairs which is known as currency pair. And, each currency which is exchanged is represented by using unique three-letter code.

The first two letter of the unique code represent the country and the third letter of the code represent currency.

For example- JPY= Japenese Yen.

Hence, the foreign exchange market operates through many of the financial institutions and on sever levels.

However if you want to know that what is forex trading and how does it work then please keep following till the end.


What is forex trading?


Forex (FX) which is also known as foreign exchange or even named as currency trading is one of the global market. It is the market where traders comes to exchange currencies.

This market face an exchange of approximately $5 trillion and even the global stock market can’t beat this. In simple terms, if you have ever travelled overseas then you have made a forex transaction.

Let’s suppose that you had a trip to France in which you converted your Indian currency to Euros. This transaction was based on the supply and demand at that time for Euros in exchange of rupees. This is how you get Euro for your Rupee.

However, you must know that the exchange rates are always fluctuating. It requires a lot of skills and spectrum of knowledge to do market based trading system.


When should you buy?


A trader will open a buy or long position if they see any possibility to the increment of any specific value of currency base.


When should you sell?


A trader is believed to open a sell or short position if they see any possibility of a specific base currency is going to decrease.


When can currencies be traded?


Forex market is a unique market across the world’s financial markets. Because it is open for 24 hours a day and for 5 days in a week.


Is it legal to trade in India?


The citizen of India are not allowed to do forex trading as guided by SEBI and enfirced by RBI. This is to minimize the risk and no one is allowed to do forex trading through any electronic or online forex trading platform.

A law issued in 2013 which says that it is prohibited to do forex trading by using electronic or online trading portals. Hence, the forex trading is said legal in a condition where you use a foreign platform for forex trading and the base currency is INR (Indian Rupees). So you can trade your currency by using only foreign platform.


However, the foreign exchange market is unique because of these characteristics:


1- This market represent largest asset class across globe which leads to high quality


2- It’s a geographical dispersion


3- It allows continuous operation whuch simply means thar you can trade for 24 hours a day except on weekends. Starts from 22:00 GMT on Sunday (Sydney) to 22:00 GMT Friday (New York)


4- There are many of the factors that affects the exchange rates.


Hence, it has been considered as the strongest and ideal competition.


Can you become rich by forex trading?


It is something that is a combination of skills and some stars of luck. When you are a champion and have deep pockets and have deep knowledge about trading. There is a big chance that it can make you rich but there isĀ  a several amount of chance that you can face losses as well.


How to start trading with Forex?


There are four easy steps to start trading, follow them


1- Select one of the currency pair

2- Now you need to analyze the market

3- Read about the quotes

4- Now finally pick your position

5- Now enter a buy position

6- enter a sell position

And, after all these start your trade with Forex.com







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