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  Category: Articles » Finance » Article
 

FOREX Trading




By Dave Markel

Copyright 2005 Dave Markel

The Foreign Exchange market, also referred to as the "FOREX" or "FX" market is the largest financial market in the world, with a daily average turnover of US$1.9 trillion - thirty times larger than the combined volume of all the United States equity markets. The FOREX website defines Foreign exchange as "the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY)".

The FOREX market was launched in the 1970s, when free exchange rates were introduced. Only the participants of the market determine the price currencies against one another. This depends on proceedings from supply and demand. Influence by a single participant in the market is practically out of the question. This is because FOREX is more of an objective market. If some of its participants would like to change prices for some manipulative purpose, they would have to operate with tens of billions dollars.

FOREX is part of the bank-to-bank currency market known as the 24-hour Interbank market. The Interbank market literally follows the sun around the world, moving from major banking centers of the United States to Australia, New Zealand to the Far East, to Europe then back to the United States.

Speculations on the FOREX exchange market give the biggest profit of all legal types of transactions. Everyday fluctuations of currencies allow FOREX traders an opportunity to make money on these changes. It is the world's biggest liquid financial market. Transactions are conducted all over the world via telecommunications 24 hours a day from 00:00 GMT on Monday to 10:00 pm GMT on Friday. In every time zone across the world there are dealers who will quote currencies. The major currencies traded in FOREX, are Euro (EUR), Japanese Yen (JPY), British Pound (GBP), and Swiss Franc (CHF). All of them are traded against the US dollar (USD).

There are many advantages to trading in the FOREX market. These include:
• The biggest number of participants and the largest volumes of transactions
• Superior liquidity and speed of the market: transactions are conducted within a few seconds according to online quotes
• The market works twenty four hours a day, five working days a week
• A trader can open or close an account for any amount of time he wants
• No restrictions as accounts with very low account balances.
• There are no fees. The only payment is the difference between buying and selling prices.
• Opportunities exist to achieve a larger profit from an investment
• It is possible to turn FOREX trading into a professional and qualified activity.
• It is possible to make deals any time at the convenience of ones home
• It is not obligatory to buy some currency first in order to sell it later.
• It is possible to open positions for buying and selling any currency without actually having it, usually involving established Internet brokers.
• The superior liquidity allows the traders to open and/or close positions within a few seconds.
• The time of keeping a position is arbitrary and has no limits - from several seconds to many years
• FOREX speculative interests can be satisfied without a real money supply, which in turn decreases overhead costs for money transfers.
• It gives an opportunity to open positions with a small account in US dollars, buying and selling a lot of other currencies.
• Most transactions must continue, since currency exchange is a required mechanism needed to facilitate world commerce.

 
 
About the Author
For more great information on FOREX Trading visit http://for-more-info.com/forex/forex-intro.html


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