Forex Definition – What is Forex? | CFI

forex

The term Forex is short for foreign exchange and refers to the buying and selling of currency on the foreign exchange market.

 

Foreign exchange trading originated in Amsterdam, more than 500 years ago and is now the largest traded financial market, with trillions of dollars being traded every day.

 

The forex market is a [decentralized market] where trading occurs between traders, banks, brokers, and other financial institutions, buying and selling currencies that are coupled as currency pairs. Currency pairs comprise two different currencies, from two different countries. Most traders make use of about 70 different currency pairs which are classified as either [major pairs], [minor pairs], [exotic pairs], or [commodity pairs].

 

Pairs will be illustrated as quotes and will have an associated price. For example, GBP/USD 1.28 would represent that the cost to buy 1 GBP is 1.28 USD.

 

You may well find that a broker will state a [bid price] and an [ask price] on their forex trading platforms. These refer to the price at which the currency pair is available to be sold, bid price, and at which the currency pair is available to be bought, ask price.

 

The forex market is open 24 hours a day, five days a week, with the largest trading centres being london, tokyo, new york, and singapore.

 

The market owes its popularity largely due to this ease of access to get started trading forex. A trader only needs access to a device that has a stable internet connection and a funded trading account.

 

Key takeaways

 

  • Forex is short for foreign exchange
  • Forex is traded by buying and selling currencies from two different countries, known as currency pairs
  • There are four types of currency pairs, major pairs, minor pairs, exotic pairs, and commodity pairs
  • The forex market is the most popular and therefore, liquid of the financial markets
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Important Disclaimer:


We would like to remind that while we endeavour to provide best possible services, CFI provides execution only services and any information, reports, opinions, commentary or other materials he receives from CFI directly or from its employees or through any analytical tools provided to him or third party research provided to him from the Company shall not be deemed as investment advice and it cannot be relied upon to make investment decisions. The Client commits to make his own research and from external sources as well to make any investment. The Client accepts that CFI will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The contents of any report provided should not be construed as an express or implied promise, as a guarantee or implication that clients will profit from the strategies herein, or as a guarantee that losses in connection therewith can, or will be limited.


Forex and CFDs are leveraged products that incur a high level of risk and a small adverse market movement may expose the client to lose the entire invested capital. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The possibility exists that you could sustain a loss in excess of your deposited funds even if a stop loss is used and therefore, you should not speculate with capital that you cannot afford to lose and be aware of trading risks. Credit Financier Invest (Mauritius) Ltd provides general information that does not take into account your objectives, financial situation or needs. The content of this website must not be interpreted as personal advice. Please ensure that you understand the risks involved and seek independent advice if necessary.

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