Forex

Forex is a decentralized market, i.e. it does not have a single exchange.
Trading is conducted through electronic networks (ECN) and brokers' platforms.

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The main instrument is currency pairs (e.g. EUR/USD, GBP/JPY).

When you buy one currency, you simultaneously sell another. Example: if you buy EUR/USD, it means you are buying euros and selling dollars.

Market Participants

The main participants include:

  • Central banks - influence exchange rates through monetary policy.
  • Commercial banks and corporations - exchange currencies for international transactions.
  • Investment funds and hedge funds - make large speculative trades.
  • Brokers and dealers - provide access to private traders.
  • Retail traders - individuals who trade through brokers for profit.

When the market works

Forex works 24 hours a day, 5 days a week.

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What is forex trading and how does it work

The foreign exchange market, or Forex, is a market that allows you to exchange the currency of one country for the currency of another. With a daily transaction volume of $6.6 trillion dollars combined, it's safe to say that the Forex market is huge! It eclipses the New York Stock Exchange (NYSE), which, by comparison, processes only $22.4 billion worth of transactions per day!

This size of the forex market attracts many different participants, including central banks, investment firms, hedge funds, corporations, brokers and retail traders. And 90% of the market participants are currency speculators!

So, when you hit the Sell button, the system picks up a buyer from all over the world. The more people trading, the more money is rotating in the market, and we call this "liquidity". As we mentioned, there are several million traders trading in the forex market around the world, because of this, liquidity in the forex market is really high!

There are about 13.9 million traders around the world who buy and sell currencies at the same time. As we mentioned earlier, this means that the liquidity of the forex market is really high.

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The market is divided into trading sessions:

  • Pacific (Sydney)
  • Asian (Tokyo)
  • European (London)
  • American (New York)

When the sessions overlap - especially London and New York - liquidity and volatility are highest.

What influences currency movements

Currency rates are influenced by:

  • Economic indicators (inflation, GDP, unemployment)
  • Decisions of central banks (rates, QE policy)
  • Geopolitical events
  • Supply and demand for currency
  • Expectations of market participants

Leverage

Brokers provide leverage (for example, 1:100), which allows you to manage large sums with a small deposit.