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| About the Forex market (= currencies) |
DEFINITION
Forex is derived from the words Foreign Exchange and is also occasionally referred to as ‘Spot FX’ or simply ‘FX’. As a simple definition, Forex
trading is the exchange of currencies at varying exchange rates, which result in profit (or loss) for those who participate as traders.
Established in 1971 when floating exchange rates began to materialize, the Forex market has enjoyed huge growth, particularly since the Internet
advanced to a level that enables trade to be made easily 24 hours a day. More recently, the minimum deposit level for an account has fallen below
the $100 mark meaning currency trading is now possible by people from all walks of life.
Historically, the FOREX interbank market was not available for small speculators. With a previous minimum transaction size and often-stringent
financial requirements, the small trader was excluded from participation in this market. But today market maker brokers are allowed to break
down the large interbank units and offer small traders the opportunity to buy or sell any number of these smaller units (lots).
Commercial banks play two roles in the FOREX market :
(1) They facilitate transactions between two parties, such as companies wishing to exchange currencies (consumers), and
(2) They speculate by buying and selling currencies. The banks take positions in certain currencies because they believe they will be worth more
(if “buying long”) or less (if “selling short”) in the future. It has been estimated that international banks generate up to 70% of their revenues from
currency speculation. Other speculators include many of the worlds’ most successful traders, such as George Soros.
The Forex market is so large and is composed of so many participants, that no one player, even the government central banks, can control the
market. In comparison to the daily trading volume averages of the $300 billion in the U.S. Treasury Bond market and the approximately $100
billion exchanged in the U.S. stock markets, the FOREX is huge, and has grown in excess of $1.5 trillion daily. It is easy to see why trading Forex
online has become such an attractive prospect for those ‘would be’ professional investors.
If we are being honest the word ‘market’ is not entirely true for Foreign Exchange since there is no one central location for trading activity. Whilst
most of the trade volume is performed through around 300 large international banks, there are millions of trades being executed all around the
globe both online and over the telephone.
Forex is derived from the words Foreign Exchange and is also occasionally referred to as ‘Spot FX’ or simply ‘FX’. As a simple definition, Forex
trading is the exchange of currencies at varying exchange rates, which result in profit (or loss) for those who participate as traders.
Established in 1971 when floating exchange rates began to materialize, the Forex market has enjoyed huge growth, particularly since the Internet
advanced to a level that enables trade to be made easily 24 hours a day. More recently, the minimum deposit level for an account has fallen below
the $100 mark meaning currency trading is now possible by people from all walks of life.
Historically, the FOREX interbank market was not available for small speculators. With a previous minimum transaction size and often-stringent
financial requirements, the small trader was excluded from participation in this market. But today market maker brokers are allowed to break
down the large interbank units and offer small traders the opportunity to buy or sell any number of these smaller units (lots).
Commercial banks play two roles in the FOREX market :
(1) They facilitate transactions between two parties, such as companies wishing to exchange currencies (consumers), and
(2) They speculate by buying and selling currencies. The banks take positions in certain currencies because they believe they will be worth more
(if “buying long”) or less (if “selling short”) in the future. It has been estimated that international banks generate up to 70% of their revenues from
currency speculation. Other speculators include many of the worlds’ most successful traders, such as George Soros.
The Forex market is so large and is composed of so many participants, that no one player, even the government central banks, can control the
market. In comparison to the daily trading volume averages of the $300 billion in the U.S. Treasury Bond market and the approximately $100
billion exchanged in the U.S. stock markets, the FOREX is huge, and has grown in excess of $1.5 trillion daily. It is easy to see why trading Forex
online has become such an attractive prospect for those ‘would be’ professional investors.
If we are being honest the word ‘market’ is not entirely true for Foreign Exchange since there is no one central location for trading activity. Whilst
most of the trade volume is performed through around 300 large international banks, there are millions of trades being executed all around the
globe both online and over the telephone.
| Back to definitions : Click here |
| Trader : Herman Bogaerts -- Tradersname : Freedom E-Mail : Herman.Bogaerts@Wanadoo.fr OR Admin@DayTrader-Generation.com |
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| Daytrader-Generation “No Gambling but True Working Tools to Achieve Profit” "Day-Trading, Business of the Future !" |
LIQUIDITY
In the FOREX market there is always a buyer and a seller. The FOREX absorbs trading volumes and per trade sizes which dwarfs the capacity of
any other market. On the simplest level, liquidity is a powerful attraction to any investor as it suggests the freedom to open or close a position at
will 24 hours a day.
ACCESS
The FOREX is open 24 hours a day, any individual trader can react to news when it breaks, rather than waiting for the opening bell of other
markets when everyone else-has the same information. This allows traders to take positions before the news details are fully factored into the
exchange rates.
TWO-WAY MARKET
Currencies are traded in pairs, for example dollar/yen, or dollar/Swiss franc. Every position involves the selling of one currency and the buying
of another. If a trader believes the Swiss franc will appreciate against the dollar, the trader can sell dollars and buy francs (“selling short’). If one
holds the opposite belief, that trader can buy dollars and sell Swiss francs (“buying long”). The potential for profit exists because there is always
movement in the exchange rates (prices).
This is what helps make the Forex unique since it is possible to profit from both rises or falls in the price of any given currency!
TRENDS
Over long and short historical periods, currencies have demonstrated substantial and identifiable trends. Each individual currency has its own
“personality,” and each offers a unique historical pattern of trends, providing diversified trading opportunities within the spot FOREX market.
There are many, many other advantages of trading the Forex and we recommend that you choose your broker wisely since the broker you choose
can be critical in determining your success (or otherwise) when trading currencies online.
In the FOREX market there is always a buyer and a seller. The FOREX absorbs trading volumes and per trade sizes which dwarfs the capacity of
any other market. On the simplest level, liquidity is a powerful attraction to any investor as it suggests the freedom to open or close a position at
will 24 hours a day.
ACCESS
The FOREX is open 24 hours a day, any individual trader can react to news when it breaks, rather than waiting for the opening bell of other
markets when everyone else-has the same information. This allows traders to take positions before the news details are fully factored into the
exchange rates.
TWO-WAY MARKET
Currencies are traded in pairs, for example dollar/yen, or dollar/Swiss franc. Every position involves the selling of one currency and the buying
of another. If a trader believes the Swiss franc will appreciate against the dollar, the trader can sell dollars and buy francs (“selling short’). If one
holds the opposite belief, that trader can buy dollars and sell Swiss francs (“buying long”). The potential for profit exists because there is always
movement in the exchange rates (prices).
This is what helps make the Forex unique since it is possible to profit from both rises or falls in the price of any given currency!
TRENDS
Over long and short historical periods, currencies have demonstrated substantial and identifiable trends. Each individual currency has its own
“personality,” and each offers a unique historical pattern of trends, providing diversified trading opportunities within the spot FOREX market.
There are many, many other advantages of trading the Forex and we recommend that you choose your broker wisely since the broker you choose
can be critical in determining your success (or otherwise) when trading currencies online.