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What are the Basics of Forex trading?

In the simplest of terms, the Forex market is comprised of traders, investors, governments, businesses and banks which all come together to speculate on and exchange international currencies. Boasting an average turnover every day of $3.98 trillion, it is by a huge margin the world’s most liquid market.

As different countries’ business hours coincide with or out of business hours elsewhere, the Forex market is operational 24 hours a day from Monday to Friday. Though it is a global market, the most important centres for trading are those of New York, London, Paris, Singapore, Hong Kong, Frankfurt, Zurich and Tokyo.

What’s interesting about the Forex market is that it has absolutely no central marketplace responsible for processing orders. The value of any given currency at any given time may vary significantly from one bank to the next. When working with a broker, such service providers bring together as much of the relevant information as possible in order to provide accurate average price quotes for traders. Working with an online broker is by far the easiest way of gaining access to this extraordinary and potentially lucrative trading market.

The market basically revolves around speculation with regard to the future price of any given currency. For example, if you believe that the value of the United States dollar is going to increase against the Euro going forward, you can purchase the USD/EUR currency pair at its current price and then sell it later on at a higher price and pocket the difference. But at the same time, there is always the possibility that your predictions will turn out to be incorrect, meaning you will come out at a loss. Which is precisely why those considering getting into Forex trading are strongly advised to consider potential losses and whether they can afford them, before getting started in the first place.