TRADING IN CFDS ON CURRENCY PAIRS/FOREX

Forex trading, or currency trading, or FX trading, as it can also be abbreviated, are all terms that describe the currency exchange market as we know it today. In simple language, it refers to the global, decentralized marketplace where individuals, companies, and financial institutions exchange currencies for one another at floating rates.

The current floating rates system, which we know today, was adopted after World War II and has been in effect ever since. Before the current Forex trading rates system, a monetary management system called the Bretton Woods Agreement was in existence, in which the exchange prices of currencies against each other were tied and correlated to the reserves of gold in possession of the two countries that were the originators of the actual currencies related to a transaction.

Forex Trading Marketplace

The Forex trading marketplace, as it stands today, is the world’s largest and most liquid market due to several factors which include, but are not limited to, ease of performing transactions over the internet, the modern development of travel, ease of international communication and modern transportation, which have made our world a smaller place.

Taking into account that the world is a smaller and more global place, this automatically means that people, goods, and services can travel faster and more efficiently. This also means that a necessity of currencies to be traded against each other is needed for this to happen. All these factors have determined a growing Forex trading marketplace, which will only continue to grow and become more dynamic, liquid, and responsive.

Online Forex Trading

Among the main participants of the Forex trading market, one of the most growing segments of the total pool of marketplace participants is retail foreign exchange traders (individuals) who participate in online Forex trading for mainly speculative reasons with the ultimate goal of generating a profit from currency fluctuations (market changes) or hedging unwanted currency risk.

This segment participates in the Forex trading marketplace via a broker (like Top Invest 100), or via a bank. In this case, the bank or the broker will issue the retail client a trading account that will be funded in a base currency (usually the local currency of the region where the client is domiciled), and the client will have the opportunity to buy and sell currencies both online and over the phone to derive profit.

In Forex trading, some currency pairs are nicknamed majors (major pairs). This category includes the most traded currency pairs, and they always include the USD on one side.

Major pairs include EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD, NZD/USD.

 

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