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What is the Forex?

Forex trading without an initial deposit

Thanks to the offers proposed by several brokers it is now possible to trade online on the Forex without making an initial minimum deposit. Find out how this works and how you can start trading for free on the major currencies.

What is STP (Straight Through Processing)?

The purpose of this article is to explain the term STP (Straight Through Processing) that is often mentioned by brokers to attract clients. Should you trust this standard?

The leverage effect with the Forex

The leverage effect is one of the particularities of the Forex market that enables you to make significant profits from small investments. Learn about its operation and functions from this article and read our advice.

 
Trading strategies adapted to the Forex

There are numerous trading strategies that are suitable for the Forex, but the simplest and most effective ones are quite few. Here therefore is a presentation of the best techniques for investing on the foreign exchange market.

Social Trading: Copying the best traders

Social Trading is a real opportunity to make money on the Forex as among other things it enables traders to copy the positions of the best traders. Here are some explanations on its operation and advantages.

The Forex for Dummies

So you know nothing about investing in currencies but want to know how the currencies market works? Read our article on Forex for Dummies with explanations, advice and tips for total beginners to the Foreign Exchange market.

 
The Metatrader platform

The Metatrader platform is undoubtedly the most popular online technical investment solution on the market. Here you can read a complete presentation of this revolutionary software and its Forex trading advantages.

The Forex Scalping strategy

Forex scalping is an investment method for currencies trading that enables the increase of the daily profit level. Read our explanations and recommended advice to implement this technique rapidly.

The Forex brokers that accept PayPal

Do you have a PayPal account or wish to create one to facilitate your online foreign exchange investments? Find out which Forex brokers accept this payment solution.

 
Trade EUR/USD online with CFDs

Learn how the rate of the EUR/USD currency pair is influenced by the analysis of the interest rates of the Euro and American Dollar, and how to anticipate future trends through a correct interpretation of these rates and their movements.

What is algorithmic trading?

Algorithmic trading consists of an automatic trading method. Learn how it works, as well as the advantages and disadvantages so you know how to use it skilfully when trading online.

Trade EUR/GBP online with the CFDs

The interest rates of the Euro and the British Pound strongly influence the rate of the EUR/BGP currency pair. Read some useful advice on this subject and learn how to use this information to make profits.

 
The best Forex indicator

So you would like to know the best Forex indicator relating to technical analysis. Learn the answer to this query in our article which will give you information that could be crucial for your trading success.

Trade EUR/JPY online with the CFDs

Learn how the interest rates of the Euro and Yen can influence the rate of the EUR/JPY currency pair and read all the essential information and some practical advice to assist you in completing a pertinent analysis of this rate.

You have probably already heard of the term Forex as an interesting opportunity for investment.

But what exactly is the Forex? How does it work?

And, more particularly, how can you invest money in it?

 

The definition of the term Forex:

The term Forex is an abbreviation of its full name, ‘the Foreign Exchange Market’, the market for the exchange of foreign currencies. The Forex is therefore, as indicated by its name, an international market where currencies from all over the world are exchanged.

It is for example possible to exchange Euros against U.S. Dollars or against Yen or any other currency, common or exotic. But the Forex is also an investment market that enables traders to speculate on the exchange rate of one currency against another.

 

Operation of the Forex:

The basic operation of the Forex is fairly simple to understand. Its role is to determine the exchange rate of one currency against another, that means the value of one currency in other foreign currencies. To do so, the currencies are not quoted individually but in fact by pair, or ‘cross currencies’.

These pairs are expressed by abbreviations each representing a given currency. For example, the EUR/USD currency pair represents the Euro/Dollar rate, or the rate of exchange of the Euro expressed in U.S. Dollars. Therefore, if the currency pair EUR/USD is quoted as 1.25 this means that one Euro is equivalent to 1.25 U.S. Dollars. Note that the first currency in a pair is called the ‘base currency’ or ‘transaction currency’ and the second currency is called the ‘quote currency’ or ‘counter currency’.

The unit used to express this quotation is called a ‘pip’.

To calculate the exchange rate, the Forex completes a calculation based on the difference between the supply and demand. In fact, the stronger the demand for the purchase of a currency, the higher its exchange rate will be.

 

Quotation for currency pairs on the Forex:

We will look closer at the manner in which the currency rates are calculated. But first it is important to remember the actions that an investor can complete on the Forex.

When we complete an operation on the Forex we exchange one currency against another. But given that the Forex functions through currency pairs the possible actions are as follows:

  • Buying a currency pair represents exchanging a quoted currency against a base currency. Therefore, buying EUR/USD represents an exchange of U.S. Dollars for Euros.
  • Selling a currency pair therefore corresponds to an inverse movement, as this is exchanging a base currency for a quoted currency. Selling EUR/USD therefore means exchanging Euros against U.S. Dollars.

The calculation of the exchange rate on a currency pair therefore takes into account the exchange volume of a currency compared to another by using the system of supply and demand.

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