What is Forex Trading?

The question, "What is Forex trading?" is often asked by people with little or no knowledge of the foreign currency exchange market. Forex trading (foreign currency exchange trading, currency trading) basically is trading money.

Foreign exchange rates, express the relationship between currencies of different countries. The exchange rate between two currencies indicates how many units of one currency can be exchanged for one unit of another currency. This exchange rate is expressed as a ratio.

What is Forex Trading About?

In Forex trading (foreign exchange trading) you are basically trading money instead of the usual stocks or bonds. Foreign exchange (Forex) looks at what one country's currency is worth in another country's currency. These currency values are constantly changing.

The Forex market is the largest financial market in the world with between $4-$4.5 trillion being traded each day.

And unlike other financial markets such as, NASDAQ, and the New York Stock Exchange, there is no central physical location or central exchange for Forex. This allows trading to operate 24/7, 365 days a week, except for a brief period over weekends. As a result, currencies are being traded around the clock as trading moves from one financial trading zone to the next.

Forex trading operates through a global network of banks, corporations, and individuals, exchanging currencies.

Currency trading works with the same objective as any other trading -- that is, you buy low and sell high.

The price of a currency is its exchange rate, which can be quoted in several different ways:

• Spot rate (cash price) In the spot market currencies are traded for immediate delivery, with settlement paid about one or two working days later due to the necessary paper work being completed.
• Cross rate -- refers to the exchange rate between two currencies, neither of which are the U.S. dollar.
• Forward rate -- refers to currencies being bought and sold at prices agreed upon now, but delivery and payment to be made at a future agreed date.

For more on Forex trading see:

• Forex Trading School
• Forex Tip Trading