Some basic concepts you need to understand when buying and selling Forex

Definition of forex

1. foreign exchange refers to the simultaneous purchase of a certain currency and the sale of another currency in the over-the-counter market.
2. Currency refers to the transaction unit issued by the national government or the central bank, and the currency value is used as the measurement unit of the transaction.
3. The base currency refers to the first currency in the currency pair and the currency that is fixed when determining the price of the currency pair. The U.S. dollar (USD) and the euro (EUR) are the most dominant benchmark currencies in terms of daily volume in the foreign exchange market . The British pound (GBP), also known as Sterling, is the third-ranked benchmark currency. Pairs with USD as the base currency include USD/ JPY , USD/CHF and USD/CAD ; pairs with EUR as the base currency include EURUSD , EUR/JPY, EUR/GBP and EUR/CHF . The British pound is the base currency for the GBP/USD and GBP/JPY pairs. The Australian dollar (AUD) is the base currency for the Australian dollar (AUD/USD) currency pair.

How does the foreign exchange market work?

Unlike most financial markets, the foreign exchange market does not have a specific trading venue. The operation of the entire foreign exchange market is based on the electronic network between banks, institutions and individuals. According to the time difference, foreign exchange trading starts in Sydney every day and then turns to Tokyo, London, New York.

How are foreign exchange prices affected?

The foreign exchange market and prices are mainly affected by international transactions and investment flows. To a certain extent, foreign exchange prices are also affected by the economy and policies of various countries, such as interest rate adjustments, inflation, and political turmoil (these factors heavily affect the stock and bond markets).