What is Forex?
The Foreign Exchange, abbreviated Forex, or FX, is the value of one currency verses the value of another currency. Currency values are in constant fluctuation in relation to each other. Comparatively, when one currency appreciates or strengthens, the other currency being measured against it will simultaneously depreciate, or weaken.
Those who have traveled abroad have experienced the Foreign Exchange while converting their home currency into that of a foreign currency (and vice versa—when it’s time to return home, their foreign currency needs to be exchanged back into their initial home currency. And since the Forex is open almost 24 hours and all currencies are constantly in motion, it may even be at a slightly different rate than before!)
The most popular Forex trading ‘pair’ among investors is between the United States Dollar (USD) and the Euro (EUR).
** At the time of this writing, the Forex quote for USD and EUR is:
1 euro = 1.2564 US dollars
Base currency verses Counter currency
The ‘base’ currency is the currency on the left of a currency pair (in the above example, EUR) and the ‘counter’ currency is on the right (USD). If a Forex investor believes the base currency will appreciate against the counter currency, they may purchase this pair. However, if they believe the base currency may depreciate against the counter currency, they might open a sell trade position.
Why do currencies fluctuate against each other?
A country’s currency will continually fluctuate due to a number of factors, including economic and geopolitical issues, monetary policy, international trades and general trading trends, or natural disasters within an area.
Forex beginner video — “What is Forex and how does it work?”
Below is an excellent primer series on Forex trading for beginners, with sequential videos also found in the play list for those wishing to delve more in-depth on specific Forex topics.
How to begin using Forex
New to trading the Foreign Exchange? Those wishing to dabble into the Forex may do so through a trading platform and a broker, such as Alpari online brokers. One of the really cool things about using Alpari as an online broker is that they offer a free demo trading platform to help investors learn the markets before risking any actual money. Here, potential investors can practice and test their strategies with a demo account for an unlimited time until they feel comfortable dabbling into the markets with real money.
Please remember, because the Forex market is continually in motion, the risk for capital loss is high. Trade responsibly and make sure to understand all the inherent risks before delving into any type of unfamiliar financial market or investment.
Happy Forex trading!