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What do you trade in forex?

Forex, also known as foreign exchange or FX, is the largest financial market in the world. It involves the buying and selling of currencies from different countries. Forex trading is popular among individual investors and traders, as well as large financial institutions and corporations.

So, what do you trade in forex? In forex, you trade currency pairs. A currency pair represents the exchange rate between two currencies. For example, the EUR/USD pair represents the exchange rate between the Euro and the US Dollar. The first currency in the pair is called the base currency, and the second currency is called the quote currency.

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When trading forex, you speculate on the direction of the exchange rate between the two currencies in a currency pair. If you believe that the value of the base currency will increase, you would buy the currency pair. If you believe that the value of the base currency will decrease, you would sell the currency pair.

Forex trading is done in lots. A standard lot is 100,000 units of the base currency, while a mini lot is 10,000 units, and a micro lot is 1,000 units. The value of a currency pair is quoted in pips, which represents the smallest price movement of a currency pair. For example, if the EUR/USD pair moves from 1.1200 to 1.1201, it has moved one pip.

Forex trading offers a high degree of liquidity, which means that there is always a buyer and a seller for every currency pair. This makes it easy to enter and exit trades, and also means that you can trade at any time of the day or night, as the forex market is open 24 hours a day, five days a week.

There are many factors that can affect the exchange rate between two currencies. These include economic indicators, such as GDP, inflation, and employment data, as well as political events, such as elections and geopolitical tensions. Traders use technical and fundamental analysis to try and predict the direction of exchange rates.

Technical analysis involves using charts and technical indicators to identify trends and patterns in price movements. Fundamental analysis involves analyzing economic and political data to determine the underlying strength or weakness of a currency.

Forex trading carries a high degree of risk, as the market can be volatile and unpredictable. Traders should have a solid understanding of the market and should use risk management techniques, such as stop-loss orders and position sizing, to manage their risk.

In conclusion, forex trading involves the buying and selling of currency pairs. Traders speculate on the direction of exchange rates between two currencies, and use technical and fundamental analysis to try and predict future price movements. Forex trading carries a high degree of risk and requires a solid understanding of the market and risk management techniques.

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