What is forex trading?
The foreign exchange market (also known as forex or FX) is the international marketplace for trading currencies plus currency derivatives. Forex trading is the exchange of currencies; in simpel terms, it is the buying plus selling of one currency for another. Forex is the largest plus most liquid financial market in the world, with an average daily turnover of USD 7.5 trillion (as of 2022).
Every day, many currency conversions are made both for private plus commercial needs; for example, you exchange your travel funds for an overseas holiday, or a corporation exchanges currencies to pay for goods purchased or sold in another country.
It can also be used for hedging existing open investments in other currencies, with the idea of reducing potential losses by opening one or multiple forex trades that offset or even eradicate risk. Trading forex can also enable individuals to speculate on specific price movements of one currency against another.
Within a forex pair, you have the base currency plus the quoted currency, e.g., EUR/USD. When you trade forex, you’re looking at how much of the quoted currency (listed to the right of the /) you need to buy one unit of the base currency (listed to the left of the /).
This means when you trade forex, you’re simultaneously buying one currency plus selling another.
What are the trading hours for the forex market?
The foreign exchange market is open 24 hours a day, beginning Monday at 5:00am local Sydney time (Australian Eastern Standard Time) until Friday at 5:00pm Eastern Standard Time.
Global market convention for all currency pairs is that the value date of open spot positions rolls to the next business day at 5:00 pm Eastern Standard Time. The exception to this is New Zealand Dollar pairs, as those value dates roll forward at 7:00 am Auckland time from Monday to Friday.
All of this means that the local time of the value date rollover fluctuates throughout the year, depending on the currency pair, counterparty location, plus daylight savings time conventions.