Foreign exchange, or Forex, is a twenty-four hours a day, five-day-a-week marketplace. In other words, trading never stops, except for the weekend. However, things that may affect trading happen over the weekend too. For example, political elections. When the race is tight, and the outcome is uncertain, market participants are unsure how to position. Therefore, gaps appear at Monday’s market opening. The Forex market is always affected; even when it is closed at the time of the event.
Trading Forex means buying or selling a currency pair; not a currency, but a currency pair. Even a currency needs a counterpart to reflect its value. If one thinks the USD (U.S. Dollar) will rise, the next thing to define is the currency against it will do that. As such, Forex trading is mostly about interpreting the value of a currency against another. This is why the Forex dashboard is made of currency pairs and not single currencies.
Explaining the Forex Dashboard
The Forex dashboard shows the broker’s offering. The broker is simply an intermediate between the investors and the market. For a commission, a broker facilitates an investor’s access to the largest financial market in the world. Moreover, a true brokerage house is an investor’s partner, supporting their decisions by offering the best of both worlds: trading conditions and representation.
The Forex dashboard used to be mainly about currency pairs. Nowadays, it contains stocks, indices, cryptocurrencies, and commodities too. And for good reason; the markets are interconnected. Not only did Forex brokers increase their offering, but in doing that, they offered investors the chance to access different markets from the same trading account.
Back to the Forex market; countries around the world have different currencies. Today’s financial system is based on the U.S. Dollar as it is the world’s reserve currency. Therefore, the USD is the pillar of the foreign exchange market. Major and minor economies around the world have their currencies represented in the Forex dashboard. They are paired against one another in such a way that a currency pair reflects the difference between the two economies.
Every currency pair comes with two prices: the Bid and Ask price. Selling only takes place from the Bid price and buying only from the Ask price. For instance, if an investor expects the EUR/USD pair to rise and wants to buy the pair, they will use the Ask price to open the position. To close it, he/she will use the Bid price. Naturally, the opposite happens when selling. Investors will use the Bid price to open the position and the Ask price to close it. This is valid for all currency pairs and all products offered in a Forex trading account. The two prices, though, aren’t equal. The difference between the Bid and Ask prices is called the “spread”. It can vary or remain fixed, depending on the type of trading account used.
Investors use an entire arsenal of tools to interpret the shape of different economies and trade their currencies. They look at the economic calendar to check the news due to come out, at charts to apply technical tools to forecast future prices, and even at geopolitical events that might influence the money flow around the world. Everything happening in the world influences the value of money. And, the foreign exchange market, Forex, is the best place to see that.
- Forex is open 24/5.
- Currencies are paired together.
- Investors use the Bid and Ask prices when selling or buying.
- The Forex dashboard contains more than just currency pairs.