**A Comprehensive Overview of Forex Trading: Understanding the Fundamentals and Key Strategies**
*Adapted and expanded from an article by Bitget News Team*
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The foreign exchange market, widely recognized as Forex or FX, plays a vital role in the global economy. It enables participants worldwide to buy, sell, exchange, and speculate on the value of different currencies. With an estimated daily trading volume exceeding $7 trillion as of 2023, Forex stands as the largest and most liquid financial market in the world. Both institutional players and retail investors participate in this dynamic environment, seeking profit opportunities and hedging against currency risks.
## What is Forex Trading?
Forex trading involves the simultaneous buying and selling of currency pairs. Unlike traditional stock markets that operate within opening and closing bells, Forex is open 24 hours a day, five days a week, thanks to its global reach spanning different time zones. Transactions occur over the counter (OTC) via decentralized electronic platforms rather than centralized exchanges.
### Key Features of the Forex Market
– **Liquidity:** The huge daily turnover makes it easy for participants to enter and exit positions.
– **Accessibility:** Minimal capital requirements, high leverage offerings, and the proliferation of online trading platforms have democratized participation.
– **Diversity of Participants:** Includes central banks, commercial banks, hedge funds, multinational corporations, and retail traders.
– **Leverage:** Forex brokers offer leveraged trading, amplifying both profits and potential losses.
## Major Currency Pairs and Their Characteristics
Currencies are traded in pairs, such as EUR/USD, GBP/USD, and USD/JPY. Each pair reflects the value of one currency relative to another. The most frequently traded pairs, known as “major pairs,” involve the US Dollar (USD) and another leading currency.
### Examples of Major Currency Pairs
– **EUR/USD:** Euro vs. US Dollar
– **USD/JPY:** US Dollar vs. Japanese Yen
– **GBP/USD:** British Pound vs. US Dollar
– **USD/CHF:** US Dollar vs. Swiss Franc
– **AUD/USD:** Australian Dollar vs. US Dollar
– **USD/CAD:** US Dollar vs. Canadian Dollar
– **NZD/USD:** New Zealand Dollar vs. US Dollar
Minor, exotic, and regional pairs also exist, providing additional trading options but often with higher spreads and lower liquidity.
## Mechanics of Forex Trading
Forex trading is structured around three main market segments:
– **Spot Market:** Immediate exchange of currencies at current prices.
– **Forward Market:** Contracts to exchange currencies at a future date at predetermined rates.
– **Futures Market:** Standardized contracts traded on exchanges to buy/sell currencies at set dates.
Most retail Forex activity occurs in the spot market, where settlement happens instantly, and positions can be maintained for seconds, minutes, or days based on trading objectives.
### How a Forex Trade Works
A Forex transaction consists of buying one currency while simultaneously selling another. Traders expect the value of the bought currency
Read more on AUD/USD trading.