FX trade or Forex Trading is actually the trading of currencies from different countries against each other.Forex or FX is simply an acronym for Foreign Exchange.
To illustrate more on this, the currency in circulation in most European countries is known as the Euro (EUR) while the US Dollar (USD) is been used in United States.
An example of how the forex market works is to buy US Dollar while simultaneously selling the Euro. This is called going long on the USD/EUR.
How Does Forex Trading Work?
Fx or Forex trading is mostly done through a market maker or a broker. You as the forex trader has control and choice over the currency pair that you like to exchange in value and also place a trade accordingly through the market maker.
Hence, if you had purchased 1,000 USD in January of 2017, it would actually cost you around 1,200 Euros.
Throughout the year the USD value vs. the Euro value decreased. Going by this, the 1,000USD you bought at the beginning of the year is now worth 1,300 Euros which is no worth $1,200 U.S. Dollars which occurred If only you had chosen to end your trade at that point, you would make a gain of $100 in the transition.
Forex trades or FX can also be placed through market maker or broker you trust. The actual orders are placed with just a few clicks of a mouse.
Then the broker passes the order along to a partner in the Interbank Market to fulfill your request, these also happens also when you choose to close the trade, instructions from you are passed through the broker down to the Interbank Market which credits your trading account with the gain or loss from the transition.
All this numerous steps can occur literally within a few seconds.