Guide to Forex Trading
Foreign exchange (Forex) trading is the trading of one currency for another on financial markets. These markets determine the exchange rates between currencies and often involve complex derivatives such as swaps. Going from the world of stock trading to that of Forex trading requires learning a whole new set of skills.
Forex Trading Guide
Frequently Asked Questions
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People trade currencies for two main reasons. The first is to hedge against currency fluctuations. If a multinational company wants to ensure that its profits are not disrupted by the swings of a particular currency, it can use forex markets to lock in a particular exchange rate so it can remove that source of volatility from its business. Secondly, people trade currencies because they think they can make money as traders, buying and selling currencies in an attempt to make a profit.
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Forex trading, short for foreign exchange trading, is the practice of trading different world currencies on financial markets. Currencies can be traded directly in the spot market or using a variety of derivatives contracts such as forwards, futures, and swaps. Forex spot trading does not occur on an exchange, only over-the-counter (OTC), and goes on 24/7.Learn More How Do You Fund a Forex Account?
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There’s no set amount, or even a range for what forex traders make. How much you make depends on market conditions, if you’re an independent trader or working for a trading firm, and your skill at trading.Learn More Forex Trading Career: Pros and Cons
Key Terms
- GBPGDP is the currency abbreviation for the British Pound Sterling. The GBP is the currency of the United Kingdom (U.K.) and is one of the most highly traded currencies.
- Currency PegA currency peg is a policy by a nation to set a fixed exchange rate between its currency and one or a series of other currencies. This can stabilize the value of a country’s currency but limits monetary policy. Pegs can also be undermined by market conditions.
- Legal TenderLegal tender is something that a country’s law recognizes as money. A country’s currency is legal tender and laws establishing what is legal tender make commerce easier by making it clear what people have to accept as money.
- QuidQuid is a nickname for the British Pound Sterling. It is the currency of the United Kingdom (U.K.).
- Nominal Effective Exchange Rate (NEER)NEER is the weighted average of a currency’s exchange rate with a group of other currencies, usually referred to as a basket of currencies. This is a measure of how strong a currency is on forex markets.
- Forex Trading RobotForex trading robot is the nickname given to automated currency trading. The software used to make these trades buys and sells currencies according to specific algorithms.
- Forex HedgeA forex hedge is a strategy to help offset the risk of currency fluctuations when investing or doing business. This can be done by using currency futures and swaps, among other methods.
- Interest Rate Differential (IRD)An IRD is the difference between two interest rates between two assets. The IRD is used to compare investments in forex, fixed income, and other markets.
Safe Haven Currency: Definition, How It Works, How to Trade
GBP: History and Trading the British Pound Sterling
Foreign Exchange Dealers Association of India (FEDAI): Definition
Currency Peg: What It Is, How It Works, and Fixed Exchange Rates
Forex Hedge: Definition, Benefits, How It Lowers Risk and Example
Explore Guide to Forex Trading
Forex Trading Robot: Definition, How It Works, and Costs
Interest Rate Differential (IRD) Definition and Examples
Norwegian Krone (NOK): History, Example, FAQs
Current Rate Method: Overview and Calculations
Net Interest Rate Differential (NIRD): What It is, How it Works
Cross: What it is, How it Works, and Types
Chinese Depositary Receipt (CDR): What it is, How it Works
Unsterilized Foreign Exchange Intervention Overview
How Fiat Currency Crises Drive Nations Toward Cryptocurrencies
Currency ETF: Meaning, Special Considerations, Examples
Non-Deliverable Swap (NDS): Overview and Examples
How Gold Affects Currencies
Big Figure: What it Means, How it Works, Strategy
Nominal Effective Exchange Rate: Definition and Uses
Foreign Currency Fixed Deposit (FCFD): Meaning, Benefits, Example
Legal Tender: Definition, Economic Functions, Examples
Understanding the Correlation Between Oil and Currency
Foreign Currency Convertible Bond (FCCB) Defined, How It Works
Exposure Netting: What it is, How it Works, Example
Eurocurrency Market: Definition, History, and Types of Markets
Purchasing Power Parity: The Big Mac Index
Temporal Method: What it Means, Examples
What Is a Quid? History of the British Pound Sterling (GBP)
Forex Careers: 5 Professional Designations
European Currency Unit (ECU): What it Means, How it Works
Yuan vs. Renminbi: What's the Difference?
Protect Your Foreign Investments From Currency Risk
Global Currency Trade: What It Is, How It Works
The U.S. Dollar's Unofficial Status as World Currency
Principal Exchange Rate Linked Security (PERL)
Eurocurrency: Meaning, Overview, Examples
Currency Union: Overview, History, Criticisms
Asian Currency Unit (ACU): What it Means, How it Works
What Is a Currency Board? Definition, What Does It Do, and Example
What Was the European Monetary System (EMS)?
What Burst the Mississippi Bubble?
Foreign Draft: What it Means, How it Works
Sawbuck: Origin, History of Slang Term For a $10 Bill
Digital Currency Exchanger (Dce): What It Means, How It Works
Currency Strategist: What It is, How it Works
Currency Adjustment Factor (CAF): How it Works, Example
How Do You Fund a Forex Account?
Eurozone Definition, History, Member Countries
Adjustable Peg: What it Means, How it Works, Example
Black Wednesday: Definition, Causes, Role of George Soros
Transfer Risk: What it is, How it Works, Example
Competitive Devaluation: Meaning, Pros and Cons, Example
Best Places to Exchange Currency in Las Vegas
Spot Commodity: What It is, How It Works, Example
Euro Definition, History, Countries That Use It
Chinese Yuan Renminbi (CNY): Overview, History
Uncovered Interest Arbitrage: What It Is, How It Works
Online Currency Exchange: What It is, How It Works
European Terms: What it Means, How it Works, Example
Xenocurrency
Universal Currency Converter: What It Means, How It Works
Cambist: What It is, How It Works, Example
Confederate Dollar (CSD): History, Demise
Forex Club: What It Means and how It Works
French Franc (F): What it was, History, Example