Answer:
Forex
Explanation:
The process of buying and selling currencies with the goal of profiting from exchange rate fluctuations is commonly known as forex trading or foreign exchange trading. In this dynamic market, traders speculate on the value of one currency relative to another, aiming to capitalize on price movements. Here are some key points about forex trading:
Currency Pairs: Currencies are traded in pairs. For instance, the EUR/USD pair represents the euro (base currency) against the U.S. dollar (quote currency). The base currency’s value is compared to the quoted currency’s value.
Going Long and Short: Traders take positions on currency pairs. Going long means buying the base currency, expecting it to appreciate. Conversely, going short involves selling the base currency, anticipating its value to decrease.
Profit Mechanism: To make money, a trader might go short on the U.S. dollar (base currency) and long on the euro (quoted currency). If the euro’s value appreciates relative to the dollar, they can sell the euros at a higher exchange rate, thus earning a profit.
Leverage: Forex trading allows for leverage, which amplifies both returns and risk. Traders can control larger positions with a smaller amount of capital.
Active Traders vs. Passive Investors: Currency trading tends to be more profitable for active traders due to low costs, diverse markets, and high leverage. Passive investors may find other investment avenues more suitable.
Remember that forex trading involves speculative risk, and it’s essential to understand the market dynamics before participating. The constant fluctuations in exchange rates provide opportunities for profit, but they also carry inherent risks
Answer:
C) Speculation
Speculation is the process of buying and selling currencies with the aim of profiting from fluctuations in exchange rates. Traders attempt to predict whether a currency will strengthen or weaken relative to another currency and take positions accordingly, hoping to buy low and sell high (or sell high and buy low). This activity involves significant risk, as exchange rates can be influenced by a multitude of factors, including economic indicators, geopolitical events, and market sentiment.
