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How Does Forex Work


  • Forex refers to the foreign exchange market where various currencies are traded.
  • One of the interesting features about forex market is that it is decentralized that is there is no central marketplace and the currencies are traded electronically over the counter.
  • The currencies are traded 24 hours a day 5 days a week these are traded at the major financial centers of New York, Tokyo, London, and others and are extremely active at any given time of the day.
  • Currencies are always traded in pairs. The first currency listed in a forex pair is called the base currency, and the second currency is called the quote currency.
  • The price of a forex pair is how much one unit of the base currency is worth in the quote currency.

For example:

EUR/USD

  • In other words, if you buy a pair, you are buying the Base (first currency listed) and selling the Quote (second currency listed)
  • so Buying the EUR/USD means that you are buying Euros and Selling U.S.

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