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What is forex?
Forex, also known as foreign exchange or FX, involves the conversion of one currency into another currency’s equivalent. The forex market can be referred to as a network of buyers and sellers, wherein the transfer of currency occurs at an agreed price.
The price is determined by supply and demand and is calculated based on several factors, including current interest rates, economic performance, sentiment toward ongoing political situations (both locally and internationally), and the perception of the future performance of one currency against another.
The process of foreign exchange is primarily initiated for practical purposes. However, a vast chunk of currency conversion is aimed at harnessing the volatility in the world’s most-traded financial market to earn profits.Learn More
What is forex trading?
Forex trading refers to the simultaneous buying and selling of currency pairs on a decentralized global market. The forex market is one of the largest and the most liquid financial markets globally with a total average turnover per day exceeding $6.6 trillion.
Moreover, the forex market is open to trade 24 hours a day, from Sunday night through to Friday night as it is not based in a central location or exchange.
Earlier, forex volumes in the futures and forwards markets surpassed volumes of the spot markets. The trading volumes in forex spot markets are now the largest as electronic trading gained momentum and the proliferation of forex brokers got a boost.Learn More
How does forex trading work?
Forex pairs/Currency pairs can be traded as contracts for difference (CFDs). Trading forex CFDs involves speculating on whether the price of one currency will rise or fall against another.
For example, if one chooses to trade GBP/USD (British pound/US dollar) thinking the value of the GBP will rise against USD, the trader goes long. In case, the opinion is that GBP will fall against USD, the trader goes short. If the prediction is correct, the trader makes a profit. If the prediction is incorrect, the trader would incur a loss. Note that, leverage amplifies both losses and profits, and losses can exceed deposits.
CFD trading enables you to benefit from getting exposure to the forex market without physically owning the underlying currency pair.Learn More
Forex currency pairs
All trading that takes place within the forex market, is always exercised via currency pairs. For instance, EUR/USD refers to a currency pair for trading the euro against the US dollar. The currency in the nominator is termed the base currency, while the denominator currency is called the counter currency. This is the exchange rate, or in this example, in other words, how many US dollars you can buy for one Euro.
The eight most traded currencies (not in a specific order) are the U.S. dollar, the euro, the British pound (or GBP), the Canadian dollar (or CAD), the Swiss franc (or CHF), the Australian dollar (or AUD), the New Zealand dollar (or NZD), and the Japanese yen (or JPY).
You can trade CFDs on over 330 currency pairs using our platform. Currency pairs are generally categorized in four groups: major, minor, regional, and exotic.
The seven currency pairs are traded most frequently and form roughly 80% of global FX trading volume. Examples include EUR/USD, USD/JPY, USD/GBP, USD/CHF, USD/CAD, AUD/USD, NZD/USD
Often known as cross currency pairs, minor pairs involve pairs of major currencies outside of the U.S. dollar. Examples include EUR/GBP, EUR/CHF, EUR/AUD, GBP/JPY, CHF/JPY, NZD/JPY, GBP/CAD
Regional pairs are currency pairs classified by region – for example, Australasia or Scandinavia. Examples include EUR/NOK (Euro/Norwegian krone), AUD/NZD, AUD/SGD (Australian dollar/Singapore dollar)
The currency pairs wherein one major currency is pitted against a currency from a smaller economy or a developing nation or any emerging market are termed as exotic. Examples include USD/PLN (US dollar/Poland złoty), GBP/MXN (British pound/Mexican peso), EUR/CZK (Euro/Czech Koruna), JPY/NOK (Japanese Yen/Norwegian krone), AUD/MXN
Types of Forex Markets
In a spot forex market, a currency pair is exchanged physically, and the transaction is exercised for immediate or ‘spot’ delivery.
The futures forex market involves a legally bound contract to buy or sell an amount of currency, set at a future date, for a pre-determined price in the central markets or exchange.
Forward forex market contracts are exercised over the counter or OTC to buy or sell an amount of currency, specified at a future date or range of future dates, for a pre-determined price.
Why Trade Forex with Century Financial
More than 330 forex pairs
Trade CFDs on a broad range encompassing the most popular currency pairs worldwide.
Competitive Forex spreads
With faster execution and tight spreads, gives seamless online forex trading experience.
Availability of huge liquidity and high leverage offers enhanced trading experience.
Real-time execution of orders makes our forex trading platform inevitable for online forex trading.
Trusted & Regulated platform
Century Financial is regulated by the Securities and Commodities Authority (SCA).
Expert Service Support
Century Financial is also reputed for its 24×5-hour trade desk access and support.
Frequently Asked Questions (FAQs)
What is a ‘Pip’ in Forex Trading?
Pip stands for "price interest point" or "percentage in point." Movement in the exchange rate is calculated by pips. A pip refers to the smallest price change that an exchange rate has the potential to make backed by forex market convention.
What is a ‘Spread’ in Forex Trading?
The bid price represents demand and is the highest amount that a forex trader is wanting to pay to buy a particular currency. The ask price represents supply and is the lowest price that a facilitator or broker wants to accept for the currency. The difference between the two equates to the bid-ask spread.
What is a ‘Stop Loss’ in Forex Trading?
A forex stop loss is a tool suggested by brokers to help traders to limit losses arising amid volatile markets moving in an unfavourable direction compared to the initial trade.
What is Hedging in Forex Trading?
Companies regularly dealing with foreign countries are at risk owing to fluctuations in currency during the buying or selling of goods and services, outside of their domestic territory. In a bid to minimize risk, companies hedge currency risk by pre-fixing a rate at which the transaction is supposed to be concluded.