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The Forex Market-What, When and Why?

Forex, FX and the Forex market are some common abbreviations for the Foreign Exchange market. Actually it is the largest financial market in the world, where money is sold and bought freely. In its present condition the Forex market was launched in the seventies, when free exchange rates were introduced, and only the participants of the market determine the price of one currency against the other proceeding from demand and supply. As far as the freedom from any external control and free competition are concerned, the Forex market is a perfect market.

With a daily turnover of over trillions of dollars, the Foreign Exchange market conducts more than three times the aggregate amount volume of the United States Equity and Treasury markets combined. The Forex market is an over-the-counter market where buyers and sellers conduct foreign exchange business using different means of communication.

Unlike other financial markets, the Forex market has no physical location or central exchange. Since the Forex market lacks a physical exchange, the market trades continuously on a 24-hour basis, moving from one time zone to the next, across each of the world's major financial centers every day. Trillions of dollars of foreign exchange activity takes place every day. From 1997 to the end of 2000, daily forex trading volume surged approximately from US$5 billion to US$1.5 trillion and more (according to various recent studies it has touched $1.7 trillion per day and dwarfs all other markets for trading in size and volume). It is really difficult, if not impossible; to determine an absolutely exact number because trading is not centralized on an exchange. But one thing is for sure that the Forex market continues to grow at a phenomenal rate.

Before the advent of Internet and ecommerce, only big corporations, multinational banks and wealthy individuals could trade currencies in the Forex market through the use of the proprietary trading systems of banks. These systems required as much as US$1 million to open an account. Thanks to advancements in online technology, today investors with only a few thousand dollars can have access to the Forex market 24 hours a day and around 5 ½ days of a week.

The Forex market is a nonstop cash market where currencies of nations are traded, typically via brokers called forex brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets while traders increase or decrease value of an investment upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events so it is also considered to be a highly volatile and fragile market too. Conditions of the Forex market never remain the same they changes every second.

The foreign exchange market dwarfs the combined operations of the New York, London, and Tokyo futures and stock exchanges. According to its size and scope it is many times larger than all other markets. Stats shows that spot transactions and forward outright Forex trading take place in the inter-bank market. 51% of the market is in spot Forex transactions, followed by 32% in currency swap transactions. Forward outright Forex transactions represent another 5% of this daily turnover, with options on 'interbank' Forex transactions making up another 8%. Therefore the inter-bank market accounts for 96% of the global foreign exchange market, with the remaining 4% being divided among all the global futures exchanges.

For traders, Forex trading provides an alternative to stock market trading. While there are thousands of stocks to choose from, there are only a few major currencies to trade (the Dollar, Yen, British Pound, Swiss Franc, and the Euro are the most popular). Forex trading also provides a lot more leverage than stock trading, and the minimum investment to get started is a lot lower. Add to that the ability to choose flexible trading hours (forex trading goes on 24 hours a day) and you have the reason why so many stock traders have flocked to day trade currencies.

Anthony Trister is a currency trader and is an owner of OneDayTrades which offers free, mechanical forex signals and an automated trading program for those wanting to trade forex. Free access available here: http://www.onedaytrades.com

In The News:

IBFX Adds PowerStats to Growing Library of Free Online Trading Tools
Business Wire (press release), CA - 23 hours ago
In currency trading, a pip is the equivalent of a tick or point in the stock market. â€œPowerStats allows traders to drill down into the Forex market and see ...

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Daily FX, NY - Jul 7, 2008
Currency market volatility has dipped once again through the past week of trade. An earlier spike in our DailyFX 3-Month Volatility Index quickly reversed ...

Currency News
Australian Dollar Falls on Home-Loans Data; NZ Dollar Rises
Bloomberg - 3 hours ago
Australia's currency declined to 95.07 US cents at 3:05 pm in Sydney from 95.23 cents in late Asian trading yesterday. It reached 94.77 cents, ...
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Canada Afternoon: C$ Ends Lower As Oil, Commodities Retreat
FXstreet.com The Foreign Exchange Market, Spain - 13 hours ago
A generally stronger tone in the US dollar was also cited as a negative for the Canadian currency. The US dollar was trading at C$1.0196 at 3:44 pm EDT ...
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... chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey, in a Bloomberg Radio interview.
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Crude Prices Drop By More Than 3% As Dollar Strengthens
AHN - Jul 7, 2008
In currency trading, the yen weakened and changed hands at 107.68 yen per US dollar in Asia. In late New York on late Thursday, the Japanese currency was at ...
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Oil Is Steady After $3 Drop on Dollar, Europe Economic Weakness Bloomberg
What's behind today's high prices? CBC.ca
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Swiss Currency Falls To 13-day Low Against Euro
RTT News, NY - 43 minutes ago
(RTTNews) - During early European deals on Wednesday, the Swiss franc pared the gains it posted in Asian trading against other major currencies. ...
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Seeking Alpha, NY - Jul 7, 2008
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The Morning Journal, OH - 3 hours ago
And young talent is the coveted currency of the game these days, especially for the mid-market teams for whom sustaining success means growing their own ...

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Live-PR.com (Pressemitteilung), Austria - Jul 7, 2008
(live-PR.com) - Sunburst Media, 6 July 2008( Live-pr ) Sunburst media is an upcoming firm which aims or does financial- currency trading. ...

currency trading - Google News