Forex is short for foreign exchange (sometimes abbreviated to just FX) and is the global, decentralized trading market of the world’s currencies. Traders, investors, banks and exchanges buy, sell and speculate on these currencies, and in turn this activity determines the foreign exchange rate.
Forex is all about speculating on the fluctuating currencies between two countries. These two currencies are referred to as ‘currency pairs’ and they’re made up of the base currency and the quote currency. The most traded currency pair of all is the Euro against the US Dollar, which is normally presented as EUR/USD.
This is the second currency that appears in the pair, and is also known as the ‘counter currency’. In the example above, the USD is the quote currency.
To trade forex is to buy and sell currencies – with the aim of making a profit. Forex trading will always involve two currencies at a time, the base currency and the quote currency. The difference in price is where you’ll make your profit or loss.
This is the price that a trader is willing to buy a currency pair at. It fluctuates constantly.
A position is a trade which is currently in progress. In trading, you can get long positions and short positions:
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