Forex
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Join →What Is Forex?
Forex, short for foreign exchange, is the market in which currencies are exchanged. Currency trading is quoted in pairs because buying one currency simultaneously means selling another.
In a currency pair such as EUR/USD, EUR is the base currency and USD is the quote currency. A price of 1.1000 means that one euro is quoted at 1.1000 US dollars.
What Moves a Currency Pair?
Exchange rates can react to interest-rate expectations, central-bank policy, inflation, economic data, political developments, capital flows, risk sentiment, and changes in relative demand for currencies.
Important Characteristics
- Forex is a global market with major trading centres across different time zones.
- Currency pairs have a base and a quote currency.
- Liquidity and spreads vary between currency pairs and market conditions.
- Leverage can magnify both gains and losses where it is available.
Key Terms
Forex, foreign exchange, currency pair, base currency, quote currency, exchange rate, leverage.
Knowledge Check
- Why is forex quoted as a currency pair?
- In EUR/USD, which currency is the base currency?
- Name two factors that can influence an exchange rate.