What is Forex?
Forex stands for FOReign EXchange. It is a decentralized market, where currency pairs are being traded. Forex is considered to be the most liquid market compared to stocks or any other asset. It has a daily transaction volume of $5 trillion, which cannot be compared with other markets’ volume. What does that mean for you? There are exciting opportunities which come along anytime you would like to trade.
The market is open 24 hours, from Monday to Friday. Forex trading starts with Australia exchange, Asia and then Europe, followed by the US market until it is closed on the weekend. During the summer, Forex starts on Sunday at 9:00pm GMT, and it is closed at 9:00pm GMT on Friday. During winter time, it starts at 10:00pm and closes at 10pm accordingly.
The most traded currency pairs
Currency pairs are categorized in three types, Majors, Minors and Exotic. Major pairs are the most liquid, and the other categories tend to be less liquid.
MAJOR CURRENCY PAIRS
Majors are the most common currency pairs which are traded worldwide. They hold over 80% of Forex trade volume. These pairs have high liquidity and low volatility. They represent developed countries with stable economies.
MINOR CURRENCY PAIRS
Minors represent pairs which do not include the american dollar. In the past, minors used to be converted in USD and later into the currency they desired. Now they are offered directly for exchange. They are typically more volatile and less liquid compared to Major pairs.
EXOTIC CURRENCY PAIRS
An exotic pair is formed by a currency from a small economy, paired with a Major currency. Compared to Majors and Minors, Exotic pairs are riskier because of their low liquidity and high volatility. They are very sensitive to financial and political shifts.
The logic behind currency pairs
Forex market transactions represent a simultaneous buying and selling of two currencies. There are included a base currency and a quote currency. EUR/USD is the most popular pair maong majors, as the most traded currency pair in the Forex market. Let’s see it deeper.