What is traded on the Foreign Exchange?

What is traded on the Foreign Exchange?

What is traded in forex?

The simple answer is MONEY.

Forex trading is the simultaneous buying of one currency and the selling of another or the buying and selling of money from one country against the money from another country. Currencies are traded through a bank, a broker, or a dealer, and are traded in pairs; for example the Euro and the Us Dollar (EUR/USD) or the Us Dollar and the Japanese Yen (USD/JPY).

Currency prices are determined by a number of factors. Political stability, inflation, and interest rates are all factored into the price of any currency, yet the most important in determining a country’s currency price are economic and political conditions in the issuing country. in some cases, governments may try to control the price of their currency by buying extensively in order to raise the price or flooding the market in order to lower the price. Nonetheless, it is impossible for one force to control the market for any length of time due to the gigantic volume of the Forex market, market forces will prevail in the long run, making currency the most open and fair investment opportunities available.

Trading Forex can be confusing because you’re not buying anything physical. when you are buying a currency, think of it as if you are buying a share in a particular country. For example, when you buy US Dollar, you are in effect buying a share in the Us economy, as the price of the currency is a direct reflection of what the market thinks about the current and future health of the US economy. Thus, the exchange rate of a given currency versus other currencies is the reflection of the overall condition of that country’s economy, compared to other countries’ economies.

Unlike other financial markets, the FX spot market has neither a physical location nor a central exchange. (Except for a small portion of the world’s daily volume which is traded on the Chicago Mercantile Exchange). The currency market is considered an Over-the-Counter (OTC) or ‘interbank’ market, because the entire market is run within a network of banks and brokers, continuously over a 24-hour period. (OTC implies that you have to trade with a specific bank or broker when you buy and sell a currency)

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