What is Forex, Liquidity & Forex Trading? (Guide)

What is Forex?

Our currency makes us able to avail of the different services available in the market. Geographical boundaries play a vital role in deciding the value of the currency. As the value of one currency changes when compared to another type of it. For example, One dollar has two different values when changed into a Euro and a Rupee. This is what Forex is all about as it makes the trading of one currency with another possible.

What is Forex Trading?

Forex trading in simpler words can be counted as the share market where shares are not brand stocks but the currency of a country. The traders have to guess or evaluate which currency is going to jump in higher profits. If a trader has brought dollars in hopes that its rate is going to increase then the dollar is the trading asset used by the trader.

What Are The Factors On Which Forex Trading Depends?

Numerous factors decide the flow of Forex trading and decide the fortunes of the traders. Such factors are as follows

Inflation

It is the rate at which services and goods are being provided. As higher inflation showcases higher rates and lower inflation narrates vice versa.

Supply And Demand

The ratio of supply and demand in the region where the currency is in use also decides ups and downs in rates associated to the currency.

Political Events and Natural Disasters

Political events and natural disasters too affect the price of the currency. A current example can be of Russian currency which falls because of the Russia-Ukraine war. Natural disasters are compensated by financial aid and giant spending which drive the rates of currency value too.

What Is Forex Liquidity?

Liquidity

Forex liquidity narrates what liquidity in terms of Forex trading means. The market has to be liquid as it is the only medium one can experience smooth trading. Forex Liquidity showcases the ability of a currency to be bought and sold. Traders always seek the pair of currencies which jas higher liquidity as it makes them able to maintain the transaction flow in the market.

Some Key features of Forex Liquidity are mentioned as follows

Different Liquidity in different times

Liquidity in Forex depends on the time at which it is being used. As the market moves every second liquidity too travels with the time making it vary every moment.

Gaps in the Forex Market

The forex market also gets affected by the announcements and the interest rates which creates gaps in the market. These gaps too showcase the liquidity in the market.

24 Hour Market

Forex is majorly different from the equity market as it allows trading 24 hours ina day which keeps the rates of transitional flow higher resulting in better liquidity.

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