Forex ?
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What Forex & Forex Trading ?
Forex is a commonly used for "foreign exchange" and it is generally used to describe a trading in the foreign exchanges market all over the world by speculators, traders and investors.
Example : Suppose the U.S. dollar is expected to weaken in value relation to Euro. Now the forex trader in this situation will sell Dollars and buy Euros. If Euro strengthens, the purchasing power to buy Dollars has now increased. The trader can now buy back more Dollars than they had to begin with, making a profit.
It is just similar to stock trading. Stock trader will buy a stock if they think its price will rise in the future and sell a stock if they think its price will fall in the future. Same as in with the forex trader will buy a currency pair if they expect its exchange rate will rise in the future and sell a currency pair if they expect its exchange rate will fall in the future.
Exchange & Rates ?
Forex market or Foreign exchange market is a global decentralized marketplace it determines the relative values of all traded currencies on these exchanges. Trading of these transactions are conducted by several market participants in many locations all over the world. It is rare that any two currencies will be identical to one another in value, and it's also rare that any two currencies will maintain the same relative value for more than a short period of time. In forex, the exchange rate between two currencies constantly changes.
Example : Suppose on 15th April 2014, one Euro was worth about $1.51 , By 10th June 2014, one euro was worth about $1.66 , It means Euro increased in value by about 10% relative to the USA Dollar or USD during the periods.
Why Exchange Rates Change ?
Demand and supply is the basic and thumb rule for any price fluctuation in any commodity, stocks, currencies, real estate and even in job market.
Just like stocks, bonds, computers, cars, and many other goods and services. A currency's value fluctuates as its supply
and demand.
Supply increase and at the same time demand decrease for a currency so it can bring down the value of that currency and even falls drastically.
Supply decrease and at the same time demand increase for a currency, due to this price rise can be seen of that particular currency.
Forex trading benefits are that you can buy or sell any currency pair, at any time subject to liquidity. So if you think the Eurozone is going to break apart, you can sell the Euro and buy the Dollar (sell EUR/USD). If you think the price of gold is going to go up, based on historical correlation patterns you can buy the Australian Dollar and sell the USD dollar (buy AUD/USD).
This also means that there really is no such thing as a "bear market" in the traditional sense. You can make or even lose money when the market is trending up or down.
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