What is Forex?
To what is Forex; FOREX stands for Foreign Exchange market or FX as it is also called so. People have generally come across the word “FOREX” but do wonder about ‘what is Forex’. It designates the purpose of dealing monetary transactions between two countries.
A simpler answer to the question “What is Forex?” would be that every country has their own currency like US DOLLOR ($) in United states, EUROS (€) in Europe etc. This means the currency of one country is useless in the other country until and unless converted. For this purpose, every currency around the world are denoted exchange rates for their currencies on the basis of which, the currencies are exchanged between countries when a global transaction or such happens.
What is FOREX Trading?
The process in which the monetary transaction between two currencies happens would be the simplest answer to the question what is Forex trading. Both the questions; “What is Forex” and “What is Forex trading” is around the same except for the areas it is emphasized. In the former question, the exchange of foreign currency is emphasised and in “What is Forex trading” the transaction of the two currencies is emphasized.
How to Forex?
How to Forex is quite different from how to do Stock Exchange even though they have around the same characteristics. The main difference between the two would be that a stock exchange does belong to a single country where as Forex is independent without any geographical boundaries. With an intention to earn profits, people around the globe are a part of Forex market. The profits are earned on the basis of the rise and fall of the exchange rates of the currencies dealt with, by the trader. Example, if a trader buys 1 Euro (€) for 13753 IRR (Iranian Riyal) on 4th January 2011and converts it back to Iranian Riyal on 6th July 2011, he/she will earn a profit of 1426 IRR (Iranian Riyal) because the exchange rate of IRR to Euro as on the date was, ( €1= 15179.9 IRR). This is the basic of ‘how to Forex’.
To a Forex, there are many instruments that are to be used, as forward contract, spot transaction, future transaction, swap transaction etc. It is only through an instrument as such that a Forex can be performed. There are also risks involved in the process of “How to Forex”. A few of them would be:
- Situations when one trader becomes ‘bankrupt’ or such.
- When the exchange rates falls continuously without a limit.
- When the government obstructs the deal, it can be from either of the country whose currency is a part of the Forex transaction.
- The difference interest rates of both the countries in the transaction.
This would provide general information over aspects as ‘How to Forex’, What is FOREX Trading?’ etc. Every business and transactions involves risks of various sort, but if carefully contracted with, it can all earn a profit as intention.