what is foreign exchange forex

Foreign exchange overview

With the Forex market open for 24 hours, investors can trade when they want. Investors in the foreign exchange market can take good positions and react quickly to changing economic conditions. Unlike the stock markets, the foreign exchange market is decentralized. Therefore, investors or account holders can exchange currency from anywhere.

  • Spot and cross rate

The spot rate refers to the market price of one currency, measured in terms of another, on a given day. The most traded or most liquid currencies are called MAJORS. The majors consist of the US dollar (USD), the euro (EUR), the British pound (GBP), the Swiss franc (CHF), the Canadian dollar (CAD), the Canadian dollar (CAD), the dollar Australian (AUD) and Japanese yen (JPY)

  • Spreads

Before making the transaction, investors request a quote from interested dealers. The quote represents the purchase and sale price of a currency, for example the quote for Euro 1.2043 – 1.2048. The difference between the bid and ask prices is called the spread.

  • Liquidity

The Forex market is considered to be the most liquid market in the world. In forex trading, investors can easily sell their shares because there are always a large number of brokers who buy currencies. In fact, the liquidity of the main currencies is very high. Here are the advantages of liquidity in forex trading:

  • Ensures the stability of currency prices
  • Investors can easily position themselves in response to changing economic conditions
  • Investors receive fair market price for currencies
  • Investors or account holders are less vulnerable to liquidity risk.