What is Forex Trading? Forex Trading Definition Explained

Online Trading » What is Forex Trading? Forex Trading Definition Explained
What is Forex Trading? Forex Trading Definition Explained 2020-07-11T15:06:34+00:00

What is Forex Trading? Forex trading, also known as foreign exchange or FX trading, refers to the global, over-the-counter market (OTC) where investors, individual traders, banks and institutions, exchange, buy and sell currencies online. The whole process is called “Forex Trading”. That’s the explanation of Forex Trading. How is Forex trading conducted? FX Trading is conducted over the ‘interbank market’, global network used by financial institutions to trade currencies between themselves. Currencies are traded 24 hours a day, five days a week. Is forex trading worth it? Well, that’s why we wrote this article, Forex has become very popular in South Africa and is the largest financial market in the world with an estimated global daily turnover of more than US$5.3 trillion. In this guide, you will learn the definition of ‘what is Forex trading and how does it work’.

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Why Forex Trading

Forex Trading comes with many benefits. There’s no commissions, no fixed lot size, low transaction costs, a 24 hour market, no one can manipulate the market and high liquidity. By trading forex, traders and investors can access the largest market in the world. Still not answered to your question “What is Forex Trading”? Read on!

What is Forex Trading

What is Forex Trading South Africa

The definition is still the same as “What is Forex Trading” and the explanation is the same. Forex trading in South Africa works the same way as in other countries. So next time you come across this question “what is forex trading in South Africa” you will know the answer. We’ve also compiled a separate guide on this topic.

What is Forex Trading and how it works?

Forex Trading is all about selling one currency in order to buy another with aim to make profit. Forex is always quoted in pairs (currency pairs) – the price of a currency pair is how much one unit of the base currency is worth in the quote currency.

Still confused about what is Forex Trading? The most important thing about forex is understating the terms and making sure that you practice with demo account.

What is Forex Trading South Africa

Ways to Trade Forex

There are two popular ways to trade forex markets. You can trade via a forex broker or with derivative products.

  • Derivative products track a fundamental currency market, so that forex traders or investors can speculate on whether the price will rise or fall. The most popular forex derivatives are CFD Trading and Spread Betting.
  • Forex brokers are companies that buy and sell currencies on behalf of retail traders, normally through a forex trading platform.

How Do Currency Markets Work?

It’s very important that you understand how the underlying forex market works irrespective of whether you decide to trade with derivative products or through a forex broker. There are three different types of forex market you must know and they are:

  • Future forex market
  • Spot forex market
  • Forward forex market

Most FX traders who speculate on forex prices do not plan to take delivery of the currency itself; instead they take advantage of price movements in the market by making exchange rate predictions. Still confused of what is Forex trading? We still got you covered.

Why Forex Trading

What is Forex Trading and How it Works

Forex Trading works like any other exchange in South Africa. You buy one asset using one currency. In Forex, it works like this way. The market price lets a trader know how much of a currency is required to buy another. A good example of this is, the USD / GBP currency exchange rate showing how many British Pounds buy one US Dollar.

Still puzzled about how Forex trading works? Here is another example, when a trader speculates on forex price movements with spread bets or CFDs, they trade on leverage, which allows them to open a position for a small portion of the full value of the trade.

Is forex trading for real? Many beginners send us emails asking us this question. The answer is yes, Forex trading is real in South Africa and any other parts of the world. Just make sure that you trade with regulated and legitimate brokers. You can visit this forex brokers’ guide.

We’ve also compiled other guides to help on your ‘how is forex trading’ question. Visit the guides below:

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