What is Forex Trading? Find out Here!
The aim of forex trading is simple. Just like any other
form of speculation, you want to buy a currency at one price and sell it at
higher price (or sell a currency at one price and buy it at a lower price) in
order to make a profit. Some confusion can arise as the price of one currency
is always, of course, determined in another currency. For instance, the price
of one British pound could be measured as, say, two US dollars, if the exchange
rate between GBP and USD is 2 exactly. In forex trading terms this value for
the British pound would be represented as a price of 2.0000 for the forex pair
GBP/USD. Currencies are grouped into pairs to show the exchange rate between
the two currencies; in other words, the price of the first currency in the
second currency. Some commonly traded forex pairs (known as ‘major’ pairs) are
EUR/USD, USD/JPY and EUR/GBP, but it is also possible to trade many minor
currencies (also known as ‘exotics’) such as the Mexican peso (MXN), the Polish
zloty (PLN) or the Norwegian krone (NOK). As these currencies are not so
frequently traded the market is less liquid and so the trading spread may be
wider.
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