Forex-Currency Trading

The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is one of the largest financial markets in the world, and includes trading between large banks, central banks , currency speculators , multinational corporations , governments , and other financial markets and institutions. The average daily trade in the global forex and related markets currently is over US$ 3 trillion.

The term foreign exchange market refers to the world's largest financial market where world currencies are bought and sold against one another. Unlike the commodity and stock markets, it is not a physical market based in one building or location. Rather, it is an organizational framework, within which participants linked by telephone and computers buy and sell currencies.With the advent of international trade and the absence of an international monetary unit, one of a nation's prime concerns is the rate at which its own local currency can be exchanged for units of a foreign currency. This system of global trading in foreign currency is known as the Foreign Exchange Market, or Forex.

The foreign exchange market is unique because of

• its trading volumes,
• the extreme liquidity of the market,
• the large number of, and variety of, traders in the market,
• its geographical dispersion,
• its long trading hours: 24 hours a day (except on weekends),
• the variety of factors that affect exchange rates .
• the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)

In comparison to the average daily trading volume of $300 Billion in the US Treasury Bond market and the less than $10 Billion exchanged in the US stock markets, the Forex market trades to the tune of more than $1.6 Trillion a day. It is by far the largest and most liquid market in the world.

The major traded currencies on the foreign exchange market are Euro, Swiss Franc, US Dollar, Sterling, Japanese Yen, and Australian Dollar. Using technical and fundamental analyses the investor can make large profits by participating on this global market.The market runs 24 hours a day in the major financial centers around the world.Most Forex transactions occur via telephone links and computer terminals located in and out of the world's major financial centers.Traditional participants in the entire process are financial institutions, banks, corporate customers, brokers, etc.Actual currency is not seen; instead, it is transferred electronically from one bank deposit account to another.

Forex is a global market and it is unlike any other market. It operates on a 24-hour basis with a break during the weekend.

As in other markets, the interaction of sellers and buyers (supply and demand) establishes the market price of a currency. The market price of a currency is its exchange rate, the price of one currency expressed in terms of another currency.