The Forex market is an international market that allows individual traders, banks and companies to trade currencies. The Forex market operates twenty-four hours per day and five days per week, and it has an average daily turnover of around four trillion dollars.
For years, the global foreign exchange market was only accessible by banks and financial institutions, and a customer who wanted to trade one currency for another had to conduct their transactions in conjunction with one of these institutions. Now, anyone can trade currencies in the Forex market in order to earn a profit, and hundreds of brokers have set up trading platforms that are designed to help traders easily exchange currencies with the click of a button.
Currency Pairs
The Forex market has sixteen major currency pairs, and these currency pairs are considered to be the most stable and predictable pairs. There are many other currency pairs in the world, and the values of many these pairs fluctuate much more rapidly.
Some Forex brokers only allow a trader to trade one of the major currency pairs when using their trading platforms, and other brokers offer the ability to easily trade any currency pair even if it is not one of the sixteen major pairs.
International Economic Factors
There is a vast number of global economic factors that can significantly affect the values of currencies. The current economic situation in a country, the political situation in a nation, the frequency with which a particular currency is used as a “reserve currency” by investors and the amount of financial investment that is flowing into a country are just some of the major factors that affect the values of currencies worldwide.
Central Banks
The central banks of the nations of the world can significantly affect the values of their currencies by printing more money or by ceasing to print more money for a certain period of time.
Short-Term Analysis And Long-Term Analysis
- The values of particular currency pairs are constantly rising or falling when the Forex market is open, and most traders use technical analysis to predict short-term trends based on these relatively quick fluctuations.
- Currency pairs usually have a steady long-term trend, and in addition to quick fluctuations in value, a currency pair will usually continue on a steady trend over a period of several months or years.
- Most Forex trading systems are only designed to trade currency pairs based on short-term trends because these types of trends can usually generate profits in the shortest period of time.