What is Forex ?
Forex is short for Foreign Exchange
More specifically, it is the “foreign exchange currency markets”, and sometimes referred to as the FX market or even the Spot market. This is where money is traded for money. The value of each country’s currency changes a little bit by the second, and as Forex traders, we take advantage of these changes to make a profit. These changes are very small, 100th of a cent, but with the proper tools at our disposal, we can magnify these small changes into large dollar amounts that are actually enough to make us rich.
Like any product, there is a value attached to it. The value increases as more people want It and the availability of it is low. The value drops as fewer people want it and there is a lot of It around. Each country prints only so much money, it’s out there to get if you want it, but the thing is, there is only so much of it out there. There is only a certain amount In the world. This being the case, it then follows the old Supply and Demand model.
A currency’s value can only be determined by being compared to another currency. 1 US Dollar Is only worth 1 US Dollar, no matter what happens. The same goes for the Swiss Franc, 1. Franc is worth 1 Franc. When you compare this 1 US Dollar to the Swiss Franc , today the 1 US Dollar might be worth 0.9679 Franc. Tomorrow, that same 1 US Dollar may be worth 0.9721 Franc. It’s this comparison that can make you money. You want to buy a currency, hold on to it, and then sell it back and end up with more money than you started with.
That Is currency trading in a nutshell.