Forex trading is one of the most popular ways of trading the currency markets. Forex markets trade the actual exchange rate between two currencies. For example, the most popular Forex market is the Euro to US Dollar exchange rate (EUR to USD), which trades the value of 1 Euro in US Dollars. There are Forex markets for most of the major currencies, including the following :
- EUR -> USD – The Euro to US Dollar exchange rate
- GBP -> USD – The British Pound (Sterling) to US Dollar exchange rate
- EUR -> GBP – The Euro to British Pound exchange rate
- CAD -> USD – The Canadian Dollar to US Dollar exchange rate
- AUD -> USD – The Australian Dollar to US Dollar exchange rate
- EUR -> CHF – The Euro to Swiss Franc exchange rate
As the Forex markets are global markets, they trade 24 hours per day from Monday morning in New Zealand (Sunday night in the US) until Friday night in Asia (also Friday night in the US). Forex markets are different from most day trading markets in that they are not provided by an exchange. Forex markets are decentralized markets, where all trades are directly between two traders (or a trader and a Forex broker). This means that there could be several different exchange rates for the same currencies, depending upon factors such as the location of the traders, and the brokers being used.
Forex markets trade the currencies directly (rather than trading contracts), and the minimum amount that can be traded is known as a lot. The size of a lot is dependant upon the Forex broker being used, but is commonly at least $25,000. This amount is usually margined, so individual traders do not need to have anywhere near the lot size in their trading account, and will borrow most of the lot size from their Forex broker instead