Forex market is a term used for the Foreign Exchange market. Now just like we sell and purchase shares and stocks in the stock market, similarly in the forex market we buy and sell currency pairs against each other. This market is the largest and the most liquid market in the world where trillions of dollars are exchanged every day.
But this market has no centralized physical location and instead should be imagined as an electronic network of banks, institutions, brokers, and individual traders. The market is open 24 hours a day, five days a week, except for holidays. However, currencies can still be traded on a holiday if at least the country/global market is open for business that day.
Now in order to deal in the forex market, a retail trader can open a forex account and then sell and purchase currencies. Forwards and futures are other methods through which one can participate in the forex market. Forwards are basically customizable where the currencies are exchanged after expiry while futures are non-customizable and the positions are often closed before expiry.
How do we benefit from Forex?
While trading in the forex market, one benefits from the fluctuations in the currencies. The currencies in the forex market are traded under an exchange rate which is a mathematical representation of the economic value between two countries. This constant fluctuation in the currency that occurs every second of the day, is a result of supply and demand plus the monetary factors across the globe known as news that affects the underlying performance of different economies.
For example, in forex trading, when you buy, say the New Zeland dollar, you are basically speculating that the New Zealand dollar is going to go up (do well) against whichever currency it is paired with, let’s say the US dollar (NZD/USD). So because of the various economic factors when the NZ dollar will register a hike in its value against the US dollar, you will experience a profit. Now is the best time to get started.
Understood.