Before you make the decision to start trading forex you should have a clear understanding of what it is and how it works. Forex stands for foreign exchange and is the world’s largest financial market in terms of trading volumes. Forex trading is worth trillions of dollars and is taking place every single day. In basic terms, trading forex is how both companies and individuals convert money from one currency into another.

Unlike with stocks or bonds, there is no centralised exchange for transactions in trading forex. Instead, currencies are traded through an international network of banks, brokers, and dealing desks, commonly known as the ‘interbank market’. You can start trading forex at any time of day or night during the week. Due to currency trading occurring twenty-four hours per day around the world’s financial centres.

Many things can influence the value of money. Causes for the rise and fall can be anything from interest rates, inflation, and government policy, to employment figures and demand for imports and exports. Forex brokers always quote prices in pairs. Representing how much of one currency can be purchased with another at that time.

Forex markets are often highly volatile. Both the susceptibility of the forex markets to a wide range of pricing factors and global events, along with the huge volumes of currencies exchanged to make it volatile. Hence, providing unparalleled opportunities for short term traders to profit.

It is very important to correctly choose a forex broker before you start trading forex. You can find more information about how to choose your broker and 5 things to consider before doing so here.