What is FOREX?

If you are looking for a new FX trading system, there are many companies that offer automated FX online trading systems. When selecting such a system, make sure that the seller offers an unconditional money back guarantee. You do not want to spend your hard-earned money on foreign currency trading software that is unsatisfactory to you. You need to be happy with the FX trading platform that you purchase as this will be one of most important parts of your currency trading tools.

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The popularity of FOREX among professionals, investors, and businessmen has sparked the interests of many individuals wanting to get the best out of their investments. But for an ordinary person, the business jargons used in FOREX may be too unfamiliar and intimidating, which may cause apprehension and doubts in joining the FOREX market.

To help people understand what FOREX really means let us briefly define and analyze the terms associated with it.

FOREX or Foreign Exchange or Foreign Exchange Market These are the terms used to describe a global interbank arena where you can exchange a nation's currency to another. The process involves selling one currency and buying the equivalent amount of the other currency.

Exchange Rate This specifies the worth or value of one currency in terms of the other currency. Exchange rates can either be fixed or floating. Fixed exchange rates have stable value and are pegged to match the value of another measure of value. Floating exchange rates have no fixed value, the amount fluctuates according to the foreign exchange market.

Currency Swap This is an agreement between two parties to exchange a given amount of currency for another. A specified amount of time is given before giving back the original amounts swapped.

FOREX Swap This activity involves an on-the-spot transaction of currencies that are placed at the same time and for the same amount as a forward transaction of foreign exchange.

Familiarizing oneself with these terms can help a person be oriented with the foreign exchange market. However, there are still a lot of business jargons to learn a long the way. Perhaps, it would also be helpful to discuss how FOREX works, how to profit from it and why it is deemed popular among business individuals.

When you participate in the market, if you feel one currency will appreciate against another, you can exchange that second currency for the first one and stay in it. Once the currency you exchanged appreciate, exchange back the currencies and then collect the profits.

Businessmen favor the foreign exchange market because of its uniqueness and advantages to other business investments. Firstly, a trader can make business ventures at anytime of the day because foreign exchange market is open for 24 hours. Secondly, it is highly liquid meaning a trader can enter or leave the market at anytime and at any situation. Thirdly, it has low transaction cost. Lastly, no one can monopolize the market as it is so vast and there are a lot of participants involve in the market.

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