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The foreign exchange market, commonly known as Forex or FX, is the largest financial market globally, where currencies are bought and sold. Forex trading involves speculating on the price movements of currency pairs, such as the euro against the U.S. dollar (EUR/USD). It operates 24 hours a day and is decentralized, with transactions conducted over-the-counter through banks, brokers, and financial institutions. The market is driven by factors like interest rates, economic data, geopolitical events, and market sentiment.
A trader buys EUR/USD, betting that the euro will strengthen against the U.S. dollar due to positive economic data from the Eurozone. If correct, the trader profits from the currency movement.
• The largest financial market for buying and selling currencies.
• Operates 24/7 with high liquidity and global participation.
• Influenced by economic data, interest rates, and geopolitical events.
Currency prices are influenced by economic indicators, central bank policies, interest rates, geopolitical tensions, and market sentiment.
Forex trading carries high volatility, leverage risks, and potential losses from rapid currency fluctuations, making risk management crucial.
Investors can trade currencies directly through brokers, use currency ETFs, or invest in companies with significant foreign exchange exposure.
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