Forex refers to the buying and selling of currencies. Forex traders attempt to predict the direction of an exchange rate. Watch to find out more.
Forex refers to the foreign exchange markets and the buying and selling of currencies. Every day an average of more than $3 trillion in transactions takes place in the forex market. Each of these transactions plays a vital role in establishing a currency pair's exchange rate.
When a traveler visits a new country or when an international business pays its foreign employees, they each convert their local currency into foreign currency. Over time these transactions cause a shift in the exchange rate. When money flows into a currency, it strengthens, and when money flows out of a currency, it weakens. These shifts in value are what gives life to the forex market. Forex traders attempt to predict the direction of an exchange rate just like stock traders try to predict the direction of a company's stock price. Forex traders buy a currency pair when they think the exchange rate will increase and sell a currency pair when they think the exchange rate will decrease. And as a global market, they can do this 24 hours a day, five days a week.
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