Partner code
vnd
for assistance

What is foreign exchange market? Thing important

Foreign exchange is a phrase that is no longer strange to many international financial investors. However, new traders still do not clearly understand the concept and important information about what is foreign exchange market. In the following article, Learn Forex Trading will summarize all the important information a trader needs to know about forex and the foreign exchange market.

What is foreign exchange market?

Foreign exchange, in English, is Foreign exchange, abbreviated as Forex. So specifically what is foreign exchange market or Foreign Exchange? Foreign exchange is a term that refers to all means of payment and exchange from one currency to another. There are many uses for foreign exchange. However, the most common is still serving trade, commerce, and tourism.

Foreign exchange can also be understood as assets or property rights, that have been valued and converted into foreign currency. In particular, it must be used as a payment method for international transactions, accepted by countries around the world.

See more: Forex is a great way to financial “billionaire”

Types of forms what is foreign exchange market?

Foreign exchange comes in many different forms, including:

Foreign currency: A foreign currency, possibly the common currency of a group of different countries.
Foreign currency payment instrument: An instrument used for payment, recorded in foreign currency. For example: Checks, drafts, promissory notes, bank cards, bank money orders,…
Documents priced in foreign currency: Stocks or bonds.
Gold: Including memorial gold, gold bars, solid gold, gold reserves of countries,…
National currency (Local currency): If it is the currency used in international payments or exports.
Cryptocurrency (Virtual Currency): Also known as electronic money or digital currency, is processed on a worldwide computer network. Typically: Ethereum, Bitcoin,…

What is foreign exchange market?

The foreign exchange market is where all foreign currency exchange and buying and selling activities take place

Now you clearly understand what is foreign exchange market, you can deduce what is foreign exchange market. That is where all exchange activities, buying and selling foreign currencies, and many other means of payment equivalent to foreign currencies take place. The form of operation of this market is decentralized, on a global scale. At the same time, strictly comply with foreign exchange laws.

The foreign exchange market serves as a trading center for buyers and sellers to meet. Originating from the need to convert currencies between countries, supporting the development of trade activities. Around the world, the foreign exchange market operates from 10 pm on Sunday to 9 pm on Friday. In the UK, the market opens at 5 am on Monday and closes at 4 am on Saturday.

Compared to the stock market, the foreign exchange market is many times larger in scale. Therefore, liquidity in foreign exchange trading is extremely high. Additionally, you can open or close orders whenever you want. Meanwhile, the stock market limits trading hours, order matching hours, and waiting time for goods to arrive.

Core knowledge of the foreign exchange market

If you are a newbie investor, you need to clearly understand the operating mechanism, trading objects, and traded goods in the foreign exchange market.

What is foreign exchange market operating mechanism?

The foreign exchange market operates according to the mechanism of trading currency pairs. That is, when traders buy a certain currency, it means they sell another currency. You need to clearly distinguish the following 3 types of currency pairs in the foreign exchange market:

Main pair: Formed from USD and 1 other currency. This type of currency pair has a trading volume accounting for 80% of the total market transactions. Naturally, their liquidity is the highest. For example: USD/JPY, USD/CAD, USD/EUR,…
Cross pair: A currency pair without USD, paired with 2 other currencies. The liquidity of this type is lower than the main pair. For example: EUR/JPY, NZD/CAD,…
Other exotic pairs: A currency pair consisting of 1 major currency and 1 currency of an emerging economic country. This type has strong volatility and lower liquidity than the main pair. For example: JPY/MXN, USD/HKD,…

Traders can use powerful support tools such as moving averages. Or the breaking point to adjust the most effective trading rate. If you want to know what is moving average or tools in forex trading are, read the forex trading tutorial article from Self-Teach Forex.

Transaction object what is foreign exchange market?

Who are the subjects trading the foreign exchange market?

There are 4 different groups of trading objects:

Government, central bank: Traders should prioritize choosing the Government or central bank of a developed country to minimize risks. Specifically, the FED – Central Bank of the United States, European Central Bank, and Central Bank of England.
Big banks: Traders can choose safe investments with big banks. Typically Citibank, Deutsche Bank, and Goldman Sachs. Large banking groups have a large number of high-net-worth transactions every day.
Forex brokers: They provide organizations or individuals with access to international financial markets. Through online trading platforms/software/applications.
Small individuals: Their main purpose when investing in foreign currency is to enjoy profits from price fluctuations, payments, or tourism.

Market traded goods what is foreign exchange market

The foreign exchange market has currency goods, existing foreign currencies, deposits in foreign currencies, and foreign currency equivalent assets. All types of goods will be exchanged directly or bought and sold through a forex broker.

What is foreign exchange market?

Once you have answered what is foreign exchange market is, you will surely be curious about the term foreign exchange trading. You can simply understand that foreign exchange (Forex) trading is the exchange and buying and selling of foreign currencies and papers with prices equivalent to foreign currencies.

Currently, foreign exchange trading is the most popular and active investment activity. Foreign exchange trading involves conversion from one national currency to another. Including capital transactions, and international and current foreign exchange service provision activities,…

See more: Instructions for registering an Exness account

Forms of investment in the foreign exchange market

Investors need to know popular forms of investment in the foreign exchange market. From there, choose the type that suits your trading style:

Forex Spot (Immediate trading): A form of investment, buying and selling goods directly to receive money immediately after sale.
Forex forward: This is a form of foreign exchange investment with a term. This means buying and selling foreign currency and payment is made at a specified time in the future.
Forex futures: A form of buying and selling futures contracts. Payment time and exchange rate are agreed upon according to a clear timeline.

A few notes when investing in foreign exchange

Before deciding to invest in the foreign exchange market. You need to carefully remember the following issues:

To get the most optimal profits, you need to manage your capital strictly. In addition, there needs to be a plan to limit potential risks.
Fluctuations in foreign exchange rates can be affected by economic fluctuations both domestically and internationally. Therefore, it is necessary to learn how to analyze the market, thereby making the most reasonable investment decisions.
Choose the best time to trade. Ignoring the golden time to trade will make investors regret it. Even suffered heavy losses.
Consider choosing a professional broker with experience in market analysis.

Conclude

Understanding the concept of what is foreign exchange market and related information will help you understand the foreign exchange market. At the same time, offers the most effective investment plans. Hopefully, with the knowledge in the above article of Learn Forex Trading, you will be more successful in this field.