What is forex?

Forex stands for foreign exchange. Sometimes its also called FX.

A simple way to understand the foreign exchange market is to think of it as changing money when you travel abroad. When you alter money, you sell money and buy another at the current exchange rate. This is because the worth of your own money is not equal to the worth of the money you require to buy. In effect, you have traded money and this is similar to foreign exchange trading.

In simple terms, it’s the simultaneous buying of one currency and the selling of another. When you trade forex, you can trade with a broker through a trading platform.

Currencies are always traded in pairs, for example GBPUSD (trading the British pound against the US dollar). The first currency in the pair is known as the “base” currency, the second one is the “quote” currency. They are also often referred to as “bid” and “offer” or “buy” and “sell”. A GBPUSD price of 1.5531 means that GBP1 buys you USD1.5531.

The most traded currency pairs are USD, EUR, GBP, CAD, CHF, JPY, AUD and NZD.