What is forex trade and how does it work?

Introduction

Forex trade or forex exchange can easily be explained as a network of sellers and buyers who always transfer currency between each other at an agreeable price. Forex trade is the means through which countries, central banks, and individuals convert one currency to the other currency. Those who have ever traveled to foreign countries know very well how forex transaction means and work. Although forex transactions are done for practical purposes, many people convert currencies to make a profit from the transaction. The amount of currency converted in a day can easily make some currency volatile. The volatility of forex trade and transactions is what makes forex trade attractive to many people. There are different types of forex markets that traders should know of. The forex market is simply run by a worldwide network of banks. 

Types of forex market

There are different types of forex markets but the major ones are only three. Here are some of them

  • Sports forex market

The first type of forex market that you should know of is the spot forex market. This is just the physical exchange of a currency pair. It is always done at the exact point where the forex trade is settled. I can be on the spot or within a short time. Sports forex can further be explained through the help of best forex brokers in south africa

  • Forward forex market

In this type of forex trade, a contract is always agreed to sell or buy an amount of currency at a specified price. This is also done at a specified date within the range of some dates in the future. 

  • Forex market

In this type of forex trade, a contract is always agreed to sell or buy a set amount of currencies at a price as well as a date in the future. In this kind of trade, a contract is always legally binding.

What are a base and a quote currency?

Before trading in forex trade, you need to understand base and quote currency. They are very important because they make the basis of forex trade. A base currency is simply a currency that is listed first in the forex pair. The quote currency on the other hand is a currency that is secondly listed on the forex pair. Forex trading is a type of trade that involves selling one currency to buy the other one. This is the reason why forex trade is normally quoted in pairs. 

Things that move the forex market

The forex market is a type of market that has been accepted by all people from all over the world. It also has currencies from all over the world. This makes exchange rate prediction very difficult as the prices of currencies keep on fluctuating from time to time. Making predictions is not also that easy as many things determine the price movement. Just like any financial trade, forex trade is normally driven by supply and demand. Before trading, it is important to know what influences the market prices.The top 8 forex brokers in South Africa can help you understand things that move the market. 

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