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Introduction to Forex Trading

1.1 What is Forex?

Forex, short for Foreign Exchange, is the global marketplace for trading currencies. The Forex market is decentralized, meaning it operates through a network of banks, financial institutions, brokers, and individual traders. With a daily trading volume of over $6 trillion, it is the largest and most liquid financial market in the world.

1.2 Why trade Forex? There are several reasons people trade Forex:

  • Market liquidity: The high trading volume ensures that orders can be executed quickly and easily, reducing the cost of trading.
  • 24-hour market: The Forex market operates 24 hours a day, five days a week, allowing traders to enter and exit positions at their convenience.
  • Leverage: Forex brokers offer leverage, enabling traders to control large positions with a small amount of capital. This increases the potential for both profits and losses.
  • Diversification: Forex trading can be a means of diversifying an investment portfolio, as currency movements often have low correlation with other asset classes.
  • Speculation: Traders can profit from short-term price movements driven by economic, political, and social events.

1.3 Major currency pairs

In the Forex market, currencies are traded in pairs. The most actively traded currency pairs are known as the “majors” and typically involve the US dollar (USD) as one of the currencies. Some of the most popular major currency pairs are:

  • EUR/USD (Euro/US Dollar)
  • USD/JPY (US Dollar/Japanese Yen)
  • GBP/USD (British Pound/US Dollar)
  • USD/CHF (US Dollar/Swiss Franc)
  • AUD/USD (Australian Dollar/US Dollar)
  • USD/CAD (US Dollar/Canadian Dollar)
  • NZD/USD (New Zealand Dollar/US Dollar)

1.4 Forex market hours

The Forex market operates 24 hours a day, from Sunday evening to Friday night, across various financial centers worldwide. Trading sessions are generally divided into four time zones: Sydney, Tokyo, London, and New York. These sessions overlap during certain periods, leading to increased market activity and potential trading opportunities. Here are the approximate market hours (in GMT):

  • Sydney session: 22:00 – 07:00
  • Tokyo session: 00:00 – 09:00
  • London session: 08:00 – 17:00
  • New York session: 13:00 – 22:00

Keep in mind that trading volumes and liquidity may vary throughout the day, which could impact your trading strategies and the execution of your orders.

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