What is Forex?
The Forex market is by far the most liquid worldwide market and is open 24 hours a day (Mon-Fri) for trading in all time-zones. The foreign exchange market is the generic term for the worldwide institutions that exist to exchange or trade currencies. Foreign exchange is often referred to as “forex” or “FX.” The foreign exchange market is an over-the-counter (OTC) market, which means that there is no central exchange and clearinghouse where orders are matched.
Imagine the ability to trade anytime you want, with leverages up to 50-200 times the margin, lower transaction costs and no specialist trading against you in a market soo liquid to be approximately 20 times larger than the daily trading volume of the New York Stock Exchange and the Nasdaq combined. It sounds almost impossible but it has been there all along.
How to trade currencies
In a nutshell, trading currencies comes in pairs. For example you can go long 1 lot GBP/JPY, meaning you just bought 1 bag of pound sterlings (15.000) and concurrently have sold an equally valued of x1 amount of Japanese yen. As long as you are long the pound and short the yen, you will receive interest for the bag of pounds but you ‘ll pay interest for the yens borrowed. (The good news is there is difference: enter carry trades).
When it’s time to close the position, the pair is simply reversed. The lot of sterlings is sold again in which you receive x2 amount of yens. Your gain: 15000 * (x2-x1) in yens.