Participating in the foreign exchange market (FX) involves trading currencies through a global market. Also called Forex, the market allows international investment and trade to occur among buyers and sellers throughout the different time zones in of the world. The terminology can be confusing for those unfamiliar with the practice and the process. This glossary of Forex terms gives a basic explanation of what they mean in this industry.

Foreign Exchange Market

The FX market is where currencies are traded. This is the largest, most liquid trading market in the world. Exchange markets for currency are made up of banks, commercial companies, investment companies, management firms, hedge funds and retail Forex brokers. The FX market is the largest financial market worldwide, and is therefore constructed by a global network of electronic communication that connects its participants to each other.

Broker

An FX broker, retail FX broker, or currency trading broker deals with a fraction of the volume of the overall foreign exchange market. These brokers have access to trading platforms through which they trade currencies on a regular basis.

Spot Rate

Spot Forex is the current exchange rate at which a currency pair can be bought or sold and it differs from the forward rate. The spot rate in this type of trading is the rate that is most commonly used by traders when trading with an online retail Forex broker.

FX Account

The type of trading account a person opens with a retail FX broker in order to trade. There are various accounts, but the initial one is often a Forex demo account. A demo account is used for training purposes, with no real losses or profit.

Market Hours

The hours during which trading takes place and market participants are able to buy, sell, exchange and speculate on currencies. The market is open 24 hours a day and five days a week. Due to the fact that the market operates in multiple time zones, trading can take place at any time.

Analysis

Forex analysis involves an examination of changes and trends in the FX market to be used by those trading to decide whether the purchase or sale of a currency pair would be appropriate. It is usually a technical analysis with the employment of charts, tools, economic indicators and current affairs.

Charts

These are charts which allow an FX trader to view historical currency exchange rates provided by Forex charting software. This software can be accessed usually for free when opening a new trading account.

Author is a freelance copywriter who writes about Forex trading and Forex broker. This material is considered a marketing communication and does not contain investment advice, an investment recommendation or an offer of or solicitation for any transactions in financial instruments.

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