When you begin learning about currency trading, you may be wondering, “What is Forex Trading and How Does it Work?” In order to better understand the process, it helps to look at an example from another market. A private contract is an agreement between two people to agree on the price of a certain currency on a specific date in the future. It’s similar to a futures contract, but is done on a standardized exchange.
The foreign exchange market is divided into different levels of access, determined by the size of the “line” and the amount of money each entity is allowed to invest in. The largest, most influential market is made up of large banks and hedge funds, which account for over 51% of all transactions. The next tier is the smaller, retail market makers and large hedge funds. If you’re a beginner, you’ll want to start with the basics and get a bit more knowledge.
Forex is traded in pairs
As mentioned before, Forex is traded in pairs. This means that you’re buying and selling the same currency pair. For example, a euro/dollar trade means that the euro will increase in value relative to the dollar. However, a bear market can also lead to losses of your entire deposit, or even more than you invested. Fortunately, you can unwind a trade by selling the euro and buying the dollar, and the process will repeat.