Understanding the Forex Market
FOREX, also known as the FX market or the foreign exchange market, is largest and oldest financial market in the world. It is also the biggest and most liquid market in the world, a market that runs 24 hours a day, five days a week, circling the globe with financial transactions. The FOREX market is unlike any other market you might trade in.
There has been some sort of foreign exchange for as long as people have needed to exchange currencies to do business. Technically, if you are a tourist traveling in a foreign country and you use a travelers check to pay for a transaction, you are engaging in foreign exchange. But traders are not interested in that type of foreign exchange. They are concerned with trading foreign exchange, which occurs when one currency is traded for another on the market purely to make a profit.
In the past, foreign exchange trading was limited to banks, major currency dealers and occasionally to very large speculators. Only these groups were able to take advantage of the currency market's liquidity and the strong trending nature of many of the world's currency exchange rates. However; recent technological advancements, along with the development of online trading platforms, have made it possible for small traders to take part in the FOREX market.
Foreign exchange market brokers are now able to break down the larger sized inter-bank units and offer individual traders the opportunity to buy or sell any number of these smaller units. These brokers give any size trader, including individual speculators or smaller companies, the option to trade at the same rates and price movements as the big players who once dominated the market.
Transactions on the FOREX market are performed continuously by dealers at major banks or at FOREX brokerage companies around the world. FOREX is a part of a worldwide market, and it is active 24 hours a day. Dealers at major institutions work 24/5 in three different shifts. Traders may place orders with brokers for overnight execution, without waiting for the opening of any market.
Because of this continuous activity, price movements on the FOREX market are very smooth, without the gaps that occur on the stock market. The daily turnover on the FOREX market is somewhere around $1.2 trillion, so there is never any danger of an investor being unable to enter and exit positions whenever they want to. The fact is that the FOREX market never stops. Even on September 11, 2001 you could still get your hands on two-side quotes on currencies.
If you compare them, you will see that the currency futures market is only one per cent as big as FOREX. In addition, currency trading is not centered on an exchange, unlike the futures and stock markets. Trading moves from major banking centers of the