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Forex is short for Foreign Exchange, and it is the buying and selling of currencies on the global foreign exchange market. Traders exchange one currency for another with the goal of making a profit from changes in the exchange rates of the two currencies.
Unlike other financial markets that operate at a centralized location (i.e., the stock exchange), the worldwide Forex market does not have a central location. It is a global electronic network of banks, financial institutions and individual Forex traders, all involved in the buying and selling of national currencies. A major feature of the Forex market is that it operates 24 hours a day, corresponding to the opening and closing of financial centers in countries all across the world. At any time, in any location, there are buyers and sellers, making the Forex market the most liquid market in the world.
Traditionally, access to the Forex market has been made available only to banks and other large financial institutions. However, with advances in technology over the years along with the industry's high leverage options, the Forex market is now available to money managers and individual Forex traders.
Forex traders trade a currency pair – such as dollars and euros (USD/EUR) or pounds and dollars (GBP/USD) through a broker or bank. There are a wide variety of currency pairs available.
Exchange rates between the two currencies are constantly fluctuating due to a range of factors, such as interest rates, international trade, inflation and political stability. Traders have to carefully consider these factors to gauge which way the exchange rates are going to move, in order to make profits. They can use a variety of techniques such as technical analysis, fundamental analysis and sentiment analysis.
Forex trading carries a high level of risk, so traders should consider their risk tolerance before starting to trade forex.
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