The Forex Markets

Written by Trader Maker

The FX/Forex markets are abbreviations for foreign exchange. This is the biggest financial market in the world with trillions of Dollars being exchanged and traded every day.
Currencies are quoted in pairs for example EUR/USD. This is the EURO against the DOLLAR. The first listed currency is known as the base currency, while the second is called the counter. The currency on the LEFT is always what you will be buying or the selling.

If you BUY EUR/USD you have bought Euros while selling Dollars (this is part of the contract and done automatically). You would do so in expectation that the Euro will appreciate (go up) relative to the US dollar.

Banks and travel agents sell currency at a pre determined rate so they are guaranteed to make money.

Why don't you look at what the 'market' is offering and cut out the middle man and buy your own currency?

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To Buy and Sell:

This is an example of a currency table. When you open a trading account you will want to do one of two things, to buy or sell. You will be buying if you expect the demand to increase and therefore value to go up, you would sell for the opposite.

 

All platforms will give you a quote for what price you can BUY and SELL a certain product for. This can also be called the BID (buy) and the OFFER (sell).

If you look at this example:

This is the Euro trading against the Dollar (currency is always traded in pairs).

The difference between the sell and the buy is called the spread, and this is how the market is made. If you wanted to buy the Dollar as you though it was going up you could buy it at 1.3411 HOWEVER you would only be able to sell it at 1.3408. This is the spread the platform offers so you

You would need to sell back at 1.3412 to make a profit.

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Recommended Platform

We recommend anyone who wants to start trading straight away uses eToro.com:

 


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