Forex is a short term for Foreign Exchange.
For us ordinary people, it is easy to explain as the exchange of one currency to another if you travel to different country. The first thing you do when you arrive on the airport is to exchange the “physical” currency from your original country to your visited country. If you have a US dollar and you visited the Europe, then you have to exchange the $ to euro(which is the currency of Europe).
Sa ating mga ordinaryong Pilipino, this is like a MONEY CHANGER, if you have a relative abroad na nagpapadala ng mga remittances, chances are, you need to exchange that currency into Philippine Peso para magamit at magastos mo siya dito sa atin.
“Narinig mo na siguro sa balita sa “TV Patrol”. “Bumaba ang palitan ng PISO kontra DOLYAR”.
It is the same thing and is common most especially to our OFW.
Forex is a large financial market and can be defined as the international currency exchange which is a very unique in the essence of it is everywhere regardless of time zone or geographical location. In contrast with the actual currency exchange happens in the airport or any money exchange establishment, in forex market, all instrument, major currencies and others are NOT physically exchange between another but are traded virtual through online transaction.
In Forex Exchange market, the main objective is to “TRADE” currency of each country in an agreed “rate”.
Each foreign currency are identified with a unique 3 symbol;
EUR - Euro (Europe),
USD - US Dollar,
GBP - British Pound,
JPY - Japanese Yen,
NZD - New Zealand Dollar,
AUD - Australian Dollar,
CHF - Swiss Franc,
CAD - Canadian Dollar
Currencies are “quoted” and traded in “pair” because one currency should be “sell” in order to “buy” another.
Below are the major currency pairs traded in the Forex Market:
EUR/USD - euro vs dollar
GBP/USD - British pound vs Dollar
USD/JPY - US dollar vs Japanese Yen
NZD/USD - new Zealand dollar vs US dollar
AUD/USD - Australian dollar vs US dollar
USD/CAD - US dollar vs Canadian dollar
USD/CHF - US dollar vs Swiss Franc
In a pair, the first currency is what we call as “base currency” and the second is the quoted currency:
EUR - base currency
USD - quoted currency
When you are buying currency, you are always buying the base currency in exchange with the quoted currency. Meaning, if you have a lot of USD in your hand and you want to add more EUR, you are simply exchanging USD to EUR. Buying EUR and Selling USD.
In the event that you need more USD, you are simply “SELLING” the EUR in exchange to USD, make sense?
The exchange rate for EUR/USD is 1.2355(this may change)
That means you need 1.2355 USD to “buy” 1 EUR and also if you want to “sell” EUR, you will get 1.2355 USD.
My next article will be about on How you can gain profit by trading.