This is essentially instant trading and the spot price represents the price at which a currency can be bought or sold. Spot trading: In this kind of trade, currency pairs are exchanged when the trade is settled. ![]() There are three ways you can trade foreign currency: All trades take place electronically and trading can be done 24 hours a day, 7 days a week.įorex trading can be done through a brokerage. Instead, it’s traded through the foreign exchange market, which is managed by banks and other financial institutions. Stocks and mutual funds are traded on a centralized exchange, such as the Nasdaq or New York Stock Exchange (NYSE). ![]() Any time you buy a currency pairing, you’re buying base currency and selling quote currency. The exchange rate is used to calculate how much you’d have to pay in the quote currency to buy the base currency. For example, in a USD/GBP pairing, USD is the base currency while GBP is the quote currency. When looking at pairings, you may want to consider how they’re ordered. Your profit tied to the currency’s exchange rate, which is the ratio of one currency’s value against another. You want the currency you buy to increase in value so you can sell it at a profit. So you might see Asian or European currencies from the same geographic region being exchanged for one another.įorex trading attempts to capitalize on fluctuations in currency values.
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