What is forex trading?

What is forex trading?

 The term forex stands for foreign exchange, forex is the trading in currency, it is the exchange of currency for another currency, and forex involve the buying of a currency while at the same time selling another currency.  People buy and sell currency because of the different part of the world we live, therefore currency values get appreciation and depression at the same time due to different factors ranges from economical to geopolitical reasons. It is from this trend that forex traders make their money.  Forex market has no physical market or location like capital market (the stock exchange) or financial market (the banks), it is traded online and 24 from Sunday night to Friday night through a global network of businesses. Currency prices are constantly changing, increasing and decreasing against each other and this makes the market interesting to traders.

 Forex market trade for 24hrs trading throughout Monday to Friday starting from wellington, New Zealand, progressing through Asia trade through Tokyo and Singapore and closing in London at network Friday night. The wide range of trading makes currency price variation less.

 Forex trading is margined product; you need to invest small   percentage of your position to profit from foreign exchange market.

 The fact that we need to exchange currency is what brought about forex trading, for example an American with US dollar has to change to Nigerian naira or Saudi riyal to buy crude oil or an Arabian man with dirham has to change it to euro to buy technology from Germany. This is why forex trading is the largest and most liquid money market in the world, forex trading started since when international trade started. Forex market is the largest financial market, it outweighed  stock market, it was reported that in 2012 by bank for settlement that it market volume  passes $5 trillion , one thing special about forex is that, it has no any central market place instead it is traded online via software.

There are basically three types of forex market that traders can trade in the market; they are spot market, forward market and the future market.

Forward market an over- the-counter market place that set price for financial commodities for future delivery.

 The spot market also called the cash market; it is a public market where currencies are traded for immediate delivery. In spot market currency are bought and sold instantly at that current price.

 In spot market delivery is done in three days, transaction day plus two working days. , spot market is organized market that can operate where ever the infrastructures for transaction exist.

 Future market:  it is forex market where transaction are offered but meant to be delivered in the future date. Traders in future market buy and sell financial commodities for delivery on future date.

 There is numerous ways to refer to forex, it can be called the currency market, FX market, forex market or the foreign exchange market, they are synonymous and almost mean same thing