So what exactly is Forex
Let’s make it simple: imagine you’re flying on a business trip from NY to Munich. After arriving at the terminal, you swap dollars for euros and just like that you execute a Forex transaction. A few days later, on your way back to NY, you exchange the remaining euros for dollars, but at a slightly different rate than the one you got first time. In your second transaction you executed an opposite action to the first and so closed a circle of buying and selling a pair of currencies.
That is how Forex trading works! Simple, right?
Forex is the buying and selling of currencies. Forex transactions always include two currencies — one is purchased while the other is sold. For example, in a Forex transaction, euros (EUR) may be purchased while US dollars (USD) are sold; or Great British pounds (GBP) purchased while Japanese yen (JPY) are sold. The two currencies involved in a transaction are considered a currency pair (e.g., EUR/USD or GBP/JPY) and each pair has an exchange rate.
Imagine the 2 currencies as a couple of heavy weight boxers, fighting an endless struggle. When one of them is ahead, the other is always behind, so first one, then the other, weakens and then gets stronger again; and on it goes forever. Each currency is indicated by a 3 letter symbol (the first 2 letters are the country it represents and the third comes from its name). For example, USD indicates the U.S. Dollar. The most traded currencies in the market are the USdollar (USD), the euro (EUR), pound (GBP), yen (JPY) and the Swiss franc (CHF).