What is forex trading

What is foreign exchange trading?

Forex trading is to buy one currency while selling another currency.

The foreign exchange market is one of the most widely traded markets in the world, with an average daily transaction volume of more than 5 trillion U.S. dollars. It is one of the world's largest and most liquid financial markets. Different currencies are exchanged continuously when individuals, companies and organizations conduct global business. There is no centralized location or exchange in the foreign exchange market, so trading is available 24 hours a day from Sunday evening to Friday evening.

Foreign exchange trading allows you to take full advantage of exchange rate fluctuations in a large number of foreign exchange currency pairs. Foreign exchange is usually traded in pairs-for example GBP/USD. You speculate that the currency price of a certain country will rise or fall relative to the currency price of another country, and you will open a position accordingly.

OS is one of the first companies in the UK to provide online foreign exchange transactions. You can trade foreign exchange CFD products. We provide all major cross currencies (or cross currency pairs) as well as selected minor, foreign and emerging market currency pairs.

Base currency and relative currency

Taking the GBP/USD currency pair as an example, the first currency, the British pound, is called the "base currency"; the second currency, the U.S. dollar, is called the "relative currency".

How to operate foreign exchange transactions?

When trading foreign exchange, you usually speculate whether the price of the base currency against the currency will rise or fall. Therefore, in the GBP/USD currency pair, if you think that the British pound will rise against the U.S. dollar, go long (buy) the currency pair. Conversely, if you think that the pound will fall against the US dollar (or the US dollar will rise against the pound), then short (sell) the currency pair.

If you are right (that is, if you are long GBP/USD, the value of the British pound against the U.S. dollar rises), you will make a profit. But if the transaction is not good for you, you will lose money.

You can use leverage for foreign exchange transactions, it will increase your potential gains, but it will also expand your potential losses.

What is margin or leverage?

Since foreign exchange transactions are margin transactions, you only need to deposit a certain percentage of the total amount you want to trade. Our margin ratio is as low as 0.20%, which can also be considered as a leverage of 500:1, which means that the value of the overall position will be 500 times the value of the funds you require to deposit to start trading. When trading on margin, please keep in mind that your profit and loss is based on the total value of the position, not the part of the funds you deposited, so your loss may exceed the funds you initially deposited.

Forex trading case

Check out our foreign exchange trading cases to understand how to buy and sell foreign exchange currency pairs CFDs, and learn more about foreign exchange transactions from us.