Forex Basics – Forex.com
What’s Forex?
“Forex” stands for foreign exchange; it’s also known as FX. In a forex trade, you buy one currency while simultaneously selling another – that is, you’re exchanging the sold currency for the one you’re buying. The foreign exchange market is an over-the-counter market.
Currencies trade in pairs, like the Euro-US Dollar (EUR/USD) or US Dollar / Japanese Yen (USD/JPY). Unlike stocks or futures, there’s no centralized exchange for forex. All transactions happen via phone or electronic network.
Who trades currencies, and why?
Daily turnover in the world’s currencies comes from two sources:
Foreign trade (5%). Companies buy and sell products in foreign countries, plus convert profits from foreign sales into domestic currency.
Speculation for profit (95%).
Most traders focus on the biggest, most liquid currency pairs. “The Majors” include US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. In fact, more than 85% of daily forex trading happens in the major currency pairs.
The world’s most traded market, trading 24 hours a day
With average daily turnover of US$3.2 trillion, forex is the most traded market in the world.
A true 24-hour market from Sunday 5 PM ET to Friday 5 PM ET, forex trading begins in Sydney, and moves around the globe as the business day begins, first to Tokyo, London, and New York.
Unlike other financial markets, investors can respond immediately to currency fluctuations, whenever they occur – day or night.
More Info: “All About the Foreign Exchange Markets in the United States“, from the Federal Reserve Bank of New York.
December 11th, 2009 at 7:33 pm
Thank you for the very interesting post ! ^^
January 14th, 2010 at 12:34 am
This will definitely allow me to develop a greater understanding of my trading, that’s for sure. I am a lot better at losing money than I am at winning it, and I appreciate all the practical insights I can get. Thanks a million!
January 14th, 2010 at 9:37 am
A lot of people take this stuff for granted, and I believe that their trading ability is lacking because of it. There is too much of a tendency to wait for quick solutions that the bulk of folds wind up fighting against their own success. A little look at the real world helps us all to keep a sharp focus in a ruthless market.