Forex trading or the foreign exchange market is an international market for selling and buying worldwide currencies. It has a large volume of business transactions that take place six days a week 24 hours a day. These monetary exchanges which take place every day are in excess of $1.5 trillion dollars. When you compare this to the Treasury bond market of the United States, whose transactions are about $300 billion in a single day, and the American stock exchange which averages $100 billion daily you can clearly see that there is an enormous amount of money involved in the Forex exchange.
The Forex Market
The foreign exchange market was first established around 1971 when fixed exchange currencies became a thing of the past. The Forex market continued to grow steadily and during the 1980s technology allowed this market to expand from a level of $70 billion in a single day to its current level of over 1.5 trillion dollars a day.
The foreign exchange market is a combination of over 5000 different trading companies such as the United States Federal Reserve, international banks, commercial companies and brokers dealing with currencies from all over the world. There is no single location of the Forex market however; it does have trading centers located in major cities such as Frankfurt, London, Hong Kong, Paris, Singapore and New York City. All trades done on the Forex market are conducted either over the internet or by telephone. Many businesses take advantage of this market in order to purchase as well as sell products in different countries. However, most Forex activity is conducted by currency traders whose goal is to generate a profit from the small movements of currency on the market.
One of the great things about the Forex market is that you do not have to be a major player in order to benefit or participate in the profits that can be made in this market. The internet has made it possible for the average person to train and be ready to conduct transactions in the Forex market in as little as 2 to 3 days.
Accessibility - this market is accessible to anyone five days a week, 24 hours a day, making it possible to do trades anytime you choose to do so and they can be done right from the comfort of your office or home.
Open market - fluctuations in currency are usually caused by events that happen in national economies. This news is accessible to everyone at the same time so therefore no one has “an edge” or “insider trading” information.
Brokers earn their money by setting what is known as a spread, this is the difference between what a currency can be purchased at and what it is actually sold for.
Profits are made in this market based on the movement of currencies. Small differences in what currencies are bought and sold for can result in huge profits. As with any investment, there is always some inherent risk and you should do your research properly before investing. Additionally there is plenty of software available today that will train you and even allow you to do a test run first before investing real money.