Forex is an acronym of Foreign Exchange. Forex trading is a trade of currencies from different countries against each other. For e.g. the circulated currency is Euro (EUR) and in US Dollar (USD) in that of United States. An e.g. of a forex trade is simultaneous purchase of Euro and selling of US Dollar.
Forex Trading
How does Forex Trading Work?
Typically, forex trading is done through a Forex Broker or Market Maker. A forex trader can choose a currency pair which is expected to be changed in value. It is better explained with a following example:
“If you had bought 800 Euros in January 2009 costing you $1000 USD. Throughout the year, the Euro’s Value vs. the U.S. Dollar’s value increased. At the end of the year 800 Euros was worth $1100 USD. Had you chosen to finish your trade at that point, you would have a gain of $100 USD.”
Forex trading gained much popularity after the arrival of internet Era. There are online Forex Brokers which lets you place order with just a few clicks of your mouse. The brokers then passes the order along to partner in the Interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds.
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