FX or Forex is short for foreign exchange. It is a process of trading one currency with another. It is among the largest traded market globally. In simply exchanging your US dollars for euros, you are already considered to partake in the global foreign exchange market.
There are things you need to bear in mind about the currency market before taking the steps in trading forex. Currencies are classified by a three-letter code and are always in pairs. It is made up of two letters that signify the country, and one letter standing for the currency.
For example, USD stands for the US Dollar and JPY is for the Japanese Yen. In the USD/JPY pair, you are buying the dollar by exchanging the yen. Here are some of the most traded currency pairs: the EUR/USD (euro/US dollar), GBP/EUR (British pound/ euro), and the GBP/USD (British pound/US dollar).
Majority of providers divide the pairs to keep them organized into the following sections:
• Major pairs - makeup 80% of global forex trading and are the most traded currencies. This includes the EUR/USD, USD/CHF, GBP/USD, and the USD/JPY.
• Minor pairs - the least traded currencies and are frequently made up of major currencies instead of the US dollar. For example, the GBP/JPY, EUR/CHF, and the EUR/GBP.
• Exotics - made up of a major currency versus a small or progressing economy. Examples are, USD/PLN, GBP/MXN, and EUR/CZK.
• Regional pairs – these currency pairs are sorted by regions like Scandinavia or Australasia. Examples are, EUR/NOR, AUD/NZD, AUD/SGD.
Most trades are made by banks or persons by buying currencies that the value can be doubled against the one they are selling. Forex trading can be profitable, however, like other investments, there are always risk connected to it. Plan out strategies well before trading. It might be challenging to initiate trades without sufficient knowledge. Read How to Start Forex Copy Trading in Malaysia for more details.