Forex is derived from the term Foreign Exchange Market. Sometimes represented by the short form of the FX. Forex can also be defined as the buying and selling currencies. Forex involves one party buying the currency in exchange for another currency. Nowadays, Forex is the largest and most liquid market in the world. An estimated USD 3 trillion traded each day. This provides endless opportunities to earn big profits from the forex market. Major currencies traded are U.S. Dollar, Japanese Yen, British Pound and the Euro.
Exchange Rate means the rate at which currencies are traded in pairs and each one against the other when traded. An example of a partner will exchange the GBP / JPY. The first currency in the pair is called the base currency and the second is called the quote currency. Quote currency is the base currency while the numerator is the denominator. Value of the base currency is always equal to 1.
The exchange rate tells how many merchants who accepted the quote currency when selling one unit of the base currency. For example, the exchange rate GBP / JPY from 146. 50 tells the buyer that 146 British Pound. 50 Japanese yen to be paid to get 1 British Pound.
The Forex market does not have a specific place of trade like other markets. Most of the trading is done by internet, fax, or telephone. At first, the currency trading unpopular because they carry only about seventy billion dollars every day. But with the invention of Forex, that number grew massively.
Currency not only deal with the U.S. dollar, but can also be translated into more than 5,000 institutions worldwide currencies, which include, commercial companies, large brokers, international banks, and government banks. Many major countries have forex trading centers such as, Frankfurt, London, New York, Paris, Hong Kong, Tokyo, and Bombay to name a few.
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