Lesson 4. What is a Forex deal?

The investor's goal in Forex trading is to profit from foreign currency movements.

More than 95% of all Forex trading performed today is for speculative purpose (e.g. profit from currency movement). The rest belongs to hedging (managing business exposures to various currencies) and other activities.

Forex trades (trading onboard internet platforms) are non-delivery trades: currencies are not physically traded, but rather there are currency contracts which are agreed upon and performed. Both parties to such contracts (the trader and the trading platform) undertake to fulfill their obligation: one side undertakes to sell the amount specified, and the other undertakes to buy it. As mentioned, over 95% of the market activity is for speculative purposes, so there is no intention on either side ti actually perform the contract (the physical delivery of the currencies). Thus, the contract ends by offsetting it against an opposite position, resulting in the profit and loss og the parties involved.
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