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Forex: What is it and how does it work?

The Forex has gained prominence in recent years. With the best Forex platforms bringing together a growing number of clients interested in knowing all the possibilities that this type of market can offer us.

Also known as the foreign exchange market, it is one of the most active markets in the world, bringing together an average of operations that reaches five trillion dollars. Below we explain what it is and how it works.

What is the Forex?

As we have already mentioned previously, the term Forex refers to the currency market. Although this market can work through an operation based on the user’s need to have to exchange different currencies with different values, the vast majority of applications are based on the desire to obtain benefits in the exchange by specialized investors .

One of the main hallmarks of Forex is the volatility of its values. Converted into an important hallmark and also one of the elements that forces the investor’s attention to be squeezed as much as possible.

How many types of markets are there?

We mainly find three types of Forex markets:

Forex Spot Market: This market is based on the physical exchange of the currency pair. This exchange has the characteristic of being liquid in a very limited space of time.
Forex forward market: Through a previously defined contract, a transaction is established with a fixed amount of currencies with a specific price. It has the characteristic that the expiration is made on a date in the future or in a range of future dates.
Forex futures market: The main differentiating element of a futures market with respect to a forward market is that the contract that is signed is binding. In this agreement, as in the previous case, a certain amount of currency is bought or sold at an agreed price on a certain date in the future.

The functioning of the market

The currency market does not work like the rest of the markets that exist. Their exchange occurs in an over-the-counter market known as OTC.

One of the main advantages that emerges from this operating methodology is that it allows you to operate 24 hours a day, without restrictions linked to any geographical location. Therefore, it is a widely used methodology for all those investors who do not want to be tied to any schedule to carry out their operations.

Listing in pairs

One of the peculiarities that define Forex operations is that it involves the purchase of one currency and the sale of another. Therefore, they are listed in pairs. The price of any transaction depends on both the first and second currency.

The price of each pair is established through the value of one unit with respect to the second.

Forex is currently one of the markets that can offer the best performance. Thanks to specialized platforms, we can operate with the best conditions and maximize the profitability of our business.