How to Trade - What is Forex

24
Jun

The foreign exchange market or Forex for short is a worldwide, decentralised financial system used for trading currencies. The large financial centres throughout the world serve as anchors between the wide range of buyers and sellers that operate around the clock. The Forex market assists international trade and investment by enabling currencies to be converted. It allows an American business to import goods from the UK and pay in pounds, even though its own income is in US dollars.

The three years from 1998, showed a decline in activity within the Foreign Exchange Market. This was primarily due to the introduction of the Euro. 2001 saw the start of a three-year surge in activity, the establishment of clear trends and higher volatility. As a result, hedging activity increased, producing a global thrust in yield. The internet, and introduction of broadband, has made the industry accessible worldwide.

Quick Forex Facts

London is the largest financial market in the world, with a volume of $3trillion a day
NYSE trades around £28 billion per day
Forex is three times larger than all the stock markets in the world combined
Forex Basics

There is no central Market Place. The market starts in Sydney, then Tokyo, London and finally New York
Trading starts at 10pm on Sunday GMT - Finishes Friday 10pm GMT - the market does not actually close but most of the brokers do
Foreign Exchange is traded through OTO (over the counter) no central exchange - traded directly bank-to-bank and through electronic networks

Why trade the Forex as a market?

The foreign exchange market currently trades combined currencies to the value of over 3 trillion dollars ($3.98) every weekday. This offers immense liquidity and therefore numerous opportunities to dip in and out with relative ease, and without the need for major infrastructure to facilitate functionality.

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