The Forex is an interbank market. Trading takes place directly between the two parts necessary to make a trade, over the telephone or on electronic networks all over the world.

The main centers for trading are Sydney, Tokyo, London, Frankfurt and New York. This means that the Forex market is open 24 hours.

The simultaneous buying of one currency and selling of another one is a currency trade. The currency combination used in the trade is called a “cross”.

Major traded currencies:

  • EUR/USD- Euro/US Dollar
  • USD/JPY- US Dollar/Japanese Yen
  • USD/CHF- US Dollar/Swiss Franc
  • GBP/USD- British Pound/US Dollar

Settlement on the value date selected in the trade means that even though the trade itself is carried out immediately, there is a small interest rate calculation left. The interest rate differential doesn’t usually affect trade considerations.

The interest rate differential varies according to the cross you are trading. On the EUR/CHF, for example, the interest rate differential is quite small, whereas the differential on NOK/JPY is large. This is because if you trade NOK/JPY, you get almost 7% annual interest in Norway and close to 0% in Japan.

If you borrow money in Japan, to finance the trade and buying NOK, you have a positive interest rate differential.

This differential has to be calculated and added to your account. You can have both a positive and a negative differential, so it may work for or against you when you make a trade.

Forex trading for beginners may seem a little bit difficult, but when you have the proper education and training you will change your mind.

For more information please check these resources:
Trading Forex Currency Pairs
Forex Trading Basics
Forex Trading Information