What Is Forex

The foreign exchange market

Forex is the process of trading one currency for another. So if you live in Great Britain and are going on holiday in the USA this month, you will need to exchange some British pounds (GBP) for US dollars (USD). When you do this you will be quoted an exchange rate, perhaps 1.60 dollars for each pound. If you had done the same thing last year, you may have been quoted 1.95 dollars for each pound. Forex traders try to anticipate the movement of the USD against the GBP. Will one go up or down against the other?

In the example above, you can trade the currency "pair" GBPUSD and if you have predicted the direction of the movement correctly you will make money. Otherwise you will lose money. If that sounds difficult, it is. But you will not have to make that prediction. Intelligent robots do it for you.

Of course, there are many currency pairs which can be traded. Probably the most popular is the Euro against the US dollar (EURUSD).

The changes in exchange rates are usually caused by the actual flow of money from one country to another and the market is absolutely huge, with many millions of dollars traded every day.

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