The term "Forex" stands for Foreign Exchange, meaning the trade on currencies from different countries. Generally, Forex traders buy and sell currency pairs in order to gain from this constantly changing market.
How does it Work?
Each country's money value is constantly changing with accordance with various variables such as demand, geopolitical events, economic news, etc., and because this happens to all currencies, currency pairs are constantly weakening or strengthening due to a wide range of International conditions. When a trader identifies an opportunity for position opening on a given pair, based on the information and knowledge he collected, he chooses the size and preferable currency pair, and places his order on his trading platform. Once he decides that the open position is about to change its direction, he then closes the position and adds the gains to his trading balance. As daily currency changes are minor, only high volume investments can bring significant gains, therefore Forex Brokerage companies offer leveraged trading. That is, traders can invest relatively small amount of money and get a 'temporary loan' from their broker, allowing them to trade on volumes up to 500 times higher than their initial investment. However, while trading, the traders can risk only the initial invested amount, meaning they are free of the risk of losing more than they have invested.