What Is Forex ?
FOREX — the currency market or foreign exchange market is decentralized worldwide market where currencies are traded. It is one of the world’s largest markets today with a volume of more over $5.4 trillion daily.
Some of the parties taking part in this market are just looking to exchange foreign currencies for their own, such as multinational corporations that must many expenses including wages in different countries where they sell their services and products in. A large part is nonetheless composed of currency traders that speculate on exchange rates movements, the same way that some people speculate on stock prices movement. A currency trader tries to take advantage of even small exchange rate fluctuation
In the Forex market there is usually little or no “inside information”. Exchange rate fluctuations are commonly as a result of actual flow of money as well as global macroeconomics anticipations. News that’s of great significance is usually made publicly so that everybody in any part of the world gets it the same time as others
A currency is usually traded against another currency. Thus, each currency pair is traditionally noted YYY/XXX, where XXX is the ISO4217 international 3-letter code of the currency in which the price of a single unit of XXX currency is usually expressed. For example, USD/EUR is the price of the dollar expressed in euros, as in 1 dollar = 0.8045 euro
Unlike futures exchange and stocks, Forex is surely an interbank, “over-the-counter” market and this means there is no single universal exchange rate for a specific currency pair. The Forex market operates 24-hours every day throughout the week between banks with banks, Forex brokers with individuals, and brokers with banks.
If the Asian session is ended the US session or the European session will kick off, so all global currencies can be traded continually. Traders usually react to news as it breaks, instead of having to wait for the market to open, as it is a common the case with many other markets
Traditionally, the only means for retail investors to gain access to the Forex market was via banks which transacted huge amounts of currencies for investment and commercial purposes. Ever since Forex rates were allowed to freely float in 1970, trading volume has rapidly increased over time
Today, exporters and importers, multinational corporations, day traders, international portfolio managers, hedge funds, speculators and long-term holders all rely on the FOREX market to pay for a wide range of services and goods, lower the risk of currency movement by hedging their performance in other markets or to transact in financial assets
Investors take part in the trade for profit. Forex trading is usually speculative by analyzing political and market news (fundamental analysis) or studying the history of trading instruments (technical analysis). On the other hand, large corporations usually trade on the Forex market to control expenses and revenues incurred in various currencies
A centralized market for currency exchange doesn’t exist; trade is takes place over the counter. The foreign exchange market is open 24-hours daily, five days a week and the currencies are usually traded globally among the main financial centers of New York, London, Tokyo, Hong Kong, Zürich, Sydney, Frankfurt, Paris and Singapore
