What is Forex Trading: Definition, Transactions, How it Works and Tips for Beginners

What is Forex Trading: Definition, Transactions, How it Works and Tips for Beginners

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Foreign exchange or forex trading is usually abbreviated as buying and selling foreign currencies. Launching investopedia, forex trading includes currency adjustments between countries, especially for trade and tourism needs.

What is Forex Trading

Forex trading trading foreign exchange. Buying and selling currency can also occur because of the need for foreign exchange such as debt payments, exports, and imports.

Citing data from the Bank for National Settlement (BNS) operated by the Federal Reserve Banks of the United States (US), in 2016 the volume of transactions per day in the forex trading market was more than 5.1 trillion US dollars.

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For comparison, the volume of transactions on the world’s largest stock exchange, the New York Exchange, is only stuck at the level of 22.4 billion dollars per day.

This phenomenon confirms that even if transactions on exchanges around the world are combined, the value will not exceed transactions in forex trading. Plus forex trading which also runs non-stop for 24 hours affects the velocity of the money.

This system is different from stock trading which only applies during business hours according to the regulations of the stock exchange authorities in each country. These rules make stock trading more restricted.

In forex trading there is no official reference to determine the value of a currency, it all depends on the strength of supply and demand. Indeed, in some cases, a number of parties can influence the movement of forex trading.

However, to move the market requires very large funds. Several things that affect foreign exchange prices include interest rates, oil prices, as well as geopolitical and economic conditions.

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As an illustration, when The Federal Reserve Banks or the Central Bank of the United States wants to attract dollars circulating in the world to return to their countries, they will raise their benchmark interest rates.

In such condition, the demand for US dollar currency will increase significantly. As a result, the value of the currency will strengthen in front of other currencies.

For forex trading investors who hold US dollar deposits, of course they will benefit when selling at a higher price.

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