Forex means Foreign Exchange Market and thus refers to the international currency market. In Forex trading (Fx trading), foreign currencies are traded. The Forex market is not new, but has been part of the standard repertoire on stock exchanges around the world for ages. In the last two decades, this market has also become more and more accessible to the general public, as many Forex brokers have moved their activities to the Internet. This move now allows private investors to participate directly in the foreign exchange business.
Forex trading on the Internet is offered by various providers, most of which are brokers belonging to a bank or other credit institution. This circumstance is due to the fact that a company that wants to be active on this market must prove a certain amount of equity capital before it receives a license from the relevant authorities. In general, however, private trading on the forex markets is possible for anyone, so private individuals trading on their own account do not need a license from the relevant financial supervisory authority. Trading in Forex also appears to be extremely lucrative. About 5.3 trillion US dollars are traded here every day. Thus, the foreign exchange market represents the largest financial market in the world, with the most participants. However, it should be noted that a corresponding equity as a trader is also required to achieve profitable results on this market. Therefore, every trader should be able to make larger investments in the short term. However, it is possible to start trading in Forex with relatively small sums, so that especially beginners can profit here.
How does Forex trading work?
Forex trading is based on foreign exchange, in this case on money pairs. Basically, you bet on a falling or a rising price. You can either bet on a buy or a sell. If you bet on a falling rate, such as the dollar/euro, you bet that the dollar will fall in relation to the euro. In doing so, one automatically buys shares in the other currency, to the same extent as the shares in the dollar are sold. The same principle applies when the exchange rate is rising. Thus, one can profit from both rising and falling rates. In order for trading to be possible, a trader account must be opened with an appropriate Forex broker. A deposit is then made on this account, the so-called trading capital. This can then be used in any amount for the trades.
Forex trades include various derivatives. Also the binary options belong to it, because also here can be traded on different currency pairs. However, these options are different from the traditional Forex trading, so that they are rather special forms.