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FXClub.com Tip: The Forex market is nowhere and everywhere. There is no central place where market players execute trades. Instead, Forex is comprised of currency transactions between banks, investment funds, Forex brokers and traders. Currency supply and demand and investors' expectations determine the market price of a currency. Some currencies also come under significant influence from central banks. The Forex market is a virtual market, which means that it is not followed by a physical delivery of currency.
Forex trading is the exchange of two currencies as currency pairs. The founding idea of forex trading is relatively simple. One monetary unit is worth a certain amount against a secondary monetary unit. At first glance, it seems unlikely to make/lose any profit trading money. The value of the profit is not in the currency trade, but in the ups and downs that occur in the value of currency trade. For example, one day the GPB (British pound) is worth 1.89 USD. The next day, it is worth 1.99 and the next week it may be worth 2.1, or follow a depreciating trend.
The value of the currency trade and the buy/ask prices therefore change, and money is earned or lost based on that currency trade value. The value of the currency trade is based on fundamental and technical analysis of the currency unit and the nation from which the currency comes. This is the world economy, and it is vast with many variables. The ability to gain foresight into how a currency unit will trend and trade accordingly will maximize profits. The lack of foresight in the world economy, national economy, and currency value (rather than price) can lose profits.