The foreign exchange market (forex, FX, or currency market) is a worldwide, decentralised, over-the-counter market for the trading of currencies. According to a statement issued by CLS, a major settler of trades, the daily traded volume in February 2018 hit $1.855 trillion*.
FX trading involves buying one currency pair "base currency" against another currency pair "counter currency" anticipating that one currency will rise or fall against another.
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How does trading Forex work?
Forex trading is similar to shares trading, except you're buying or selling one currency against another. It typically involves leverage which allows you to trade a much bigger volume by using only a limited amount of capital. There are many different forex strategies used for trading Forex. See below an example of how you could trade Forex using 1:100 leverage.
Forex Trading example
Opening the position
The price of the AUD against the USD (AUD/USD) is 0.71706 bid /0.71707 ask. You would like to buy 1 standard lot (AUD100,000) at 0.71707 ask.
You have 5,000 AUD balance and the leverage is 1:100
100,000 AUD x 0.71707 = 71,707 USD Opening value
100,000 AUD x 1% = 1,000 AUD required margin
Closing the position
Three days later, the price of AUD against the USD rises up to 0.72752 bid/0.72754 ask. Since you are in profit, you would like to close your position by selling 1 standard lot (AUD100,000) at 0.72752 bid.
100,000 AUD x 0.72752 = 72,752 USD Closing value
Gross profit on trade USD 1,045.00 USD
Global Prime FX offers over 50+ currency pairs including spot metals.