Forex investors can trade any two currencies in the world.

Forex is one of the simplest markets for traders to establish themselves in. Not only are there no restrictions against day trading, but investors also benefit from leverage. This affords them much more trading power.

And that creates greater return on investment. Moreover, constant volatility means prices are always in flux. To participate in forex, traders need to establish a forex trading account with a broker. This allows access to currency spot prices and bid-ask rates.

Traders select currency pairs to trade, with the base currency first and the quote currency second. The first currency is bought; the second is sold. The idea is to trade pairs with rising relative value, to sell them again later at a profit. The relative simplicity of the forex market makes it great for beginners who lack microeconomic proficiency. Serious traders can align themselves with the peak market times of economies around the world to capitalize on currency fluctuations in those countries or currencies. Forex has some special terms that traders should get familiar with.

These terms play an important role in understanding how the forex market works and how to trade currency effectively:. While there are many other forex terms to get familiar with , knowing the basics will get you trading in this market.

The Foreign Exchange Market

In fact, most additional terms deal with the transaction of currency pairs. The foreign exchange market is one of the most important global financial markets. Moreover, its chief purpose is to facilitate conversions of one currency to another. This allows for import-export, as well as transfer of wealth across borders.

To learn more about global markets and building wealth , sign up for the Manward Press e-letter below. This daily newsletter gives you valuable tips to find your path to financial freedom in your life. Under the surface, forex provides credit to countries and helps businesses hedge against risk when doing business overseas. Search for:. Articles by Investment U Research Team. Financial Literacy Small Cap vs. March 29, Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising.

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Foreign exchange market - Wikipedia

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The foreign currency market: What it is and how it works

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Functions of Foreign Exchange Market Meaning: Foreign exchange market is the market in which foreign currencies are bought and sold. The buyers and sellers include individuals, firms, foreign exchange brokers, commercial banks and the central bank.