What is FOREX (Foreign Exchange) ?
Mark J.
Forex (Foreign Exchange) simply means the buying of one currency and selling another at the same time. In other words, the currency of one country is exchanged for those of another. The currencies of the world are on a floating exchange rate, and are always traded in pairs - Euro/Dollar, Dollar/Yen, etc. In excess of 85 percent of all daily transactions involve trading of the major currencies.
Four major currency pairs are usually used for investment purposes. They are: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc. The following notation is used for these currency pairs: EUR/USD, USD/JPY, GBP/USD, and USD/CHF. You may consider them as "blue chips" of the FOREX market. No dividends are paid on currencies. The investment profits come from well known "buy low - sell high".
If you think one currency will appreciate against another, you may exchange that second currency for the first one and stay in it. In case everything goes as planned, some time later you may make the opposite deal - exchange this first currency back for that other - and collect profits.
Transactions on the FOREX market are fulfilled by dealers at major banks or FOREX brokerage companies. FOREX is the world wide market, so when you are sleeping in the North America some dealers in Europe are trading currencies with their Japanese counterparties. Therefore the FOREX market is active 24 hours a day and dealers at major institutions are working in three shifts. Clients may place take-profit and stop-loss orders with brokers for overnight execution.
Price movements on the FOREX market are very smooth and without gaps that you face almost every morning on the stock market. The daily turnover on the FOREX market is about $1.2 trillion, so investor can enter and exit position without problems. The fact is that the FOREX market never stops, even on the day of September-11, 2001 you could obtain two-side quotes on currencies.
The currency (foreign exchange) market is the largest and oldest financial market in the world. It is also called the foreign exchange market, or "FOREX" or "FX" market for short. It is the biggest and most liquid market in the world, and it is traded mainly through the 24 hour-a-day inter-bank currency market - the primary market for currencies. The forex market is a cash (or "spot") inter-bank market. By comparison, the currency futures market is only one per cent as big.
Unlike the futures and stock markets, trading of currencies is not centralized on an exchange. Forex literally follows the sun around the world. Trading moves from major banking centers of the U.S. to Australia and New Zealand, to the Far East, to Europe and finally back to the U.S.
In the past, the forex inter-bank market was not available to small speculators due to the large minimum transaction sizes and often-stringent financial requirements. Banks, major currency dealers and the occasional huge speculator used to be the principal dealers. Only they were able to take advantage of the currency market's fantastic liquidity and strong trending nature of many of the world's primary currency exchange rates.
Today, foreign exchange market maker brokers such as FX Solutions are able to break down the larger sized inter-bank units, and offer small traders the opportunity to buy or sell any number of these smaller units (lots).
These brokers give virtually any size trader, including individual speculators or smaller companies, the option to trade the same rates and price movements as the large players who once dominated the market. Market makers quote buying and selling rates for currencies, and they profit on the difference between their buying and selling rates.
Learn about FOREX @ 123 Forex
About the Author
FOREX Expert
The latest information and news on Forex:
Euro Forecast to Recover Against US Dollar on Options Sentiment - Daily FX
FXstreet.com The Forex Market
Euro Forecast to Recover Against US Dollar on Options Sentiment
Daily FX
Forex options risk reversals show distinct risk that the US Dollar may slip further against the Euro, Australian Dollar and New Zealand Dollar through ...
Forex: New Zealand Rate Decision and the Feder...
WORLD FOREX: Euro Gains As Global Economic Picture Brightens - Wall Street Jo...
Reuters
WORLD FOREX: Euro Gains As Global Economic Picture Brightens
Wall Street Journal
NEW YORK (Dow Jones)--The euro shook off lingering concerns over sovereign debt Wednesday to gain against the dollar ...
FOREX-Euro, sterling pressured by fiscal concernsReuters
FOREX-Yen firm, euro and pound hurt by...
FOREX-US dollar down vs euro; yen falls on easing bets - Reuters
Earthtimes (press release)
FOREX-US dollar down vs euro; yen falls on easing bets
Reuters
NEW YORK, March 10 (Reuters) - The dollar slipped against the euro while the yen fell on Wednesday, as risk appetite improved in ...
FOREX-Yen down on concern ahead of BOJ, pound slipsReuters India
Yen Gains on Spec...
WORLD FOREX: Euro Ticks Up Vs Yen On Japan Importer Buying - MarketWatch
WORLD FOREX: Euro Ticks Up Vs Yen On Japan Importer Buying
MarketWatch
... that Japanese importers' buying flows became more dominant and set the trend, said Yuzo Sakai, a foreign-exchange manager at Tokyo Forex & Ueda Harlow. ...
and more »
The Trend Trader For Forex Trading on Thursday, March 11, 2010 - Inside Futures
The Trend Trader For Forex Trading on Thursday, March 11, 2010
Inside Futures
The Trend Trader helps to identify the current trend status of your favorite forex markets. It not only helps us to stay ...
and more »
foreign exchange - Google News
China On Gold - Stating The Obvious - istockAnalyst.com (press release)
Washington Post
China On Gold - Stating The Obvious
istockAnalyst.com (press release)
Reuters reports on comments made by China's top foreign exchange manager at the annual gathering of the National People's Congress in Beijing on the subject ...
Play the Chinese Yuan's Fortunes with These E...
WW Grainger's daily sales up 12 percent in Feb. - The Associated Press
WW Grainger's daily sales up 12 percent in Feb.
The Associated Press
... Inc. said Wednesday that its daily sales rose 12 percent in February on acquisitions, seasonal product sales and favorable foreign exchange rates. ...
Grainger Reports February 2010 Sales ResultsMarketWatch (press release)
W.W....
RPT-Q+A-What foreign exchange reforms are brewing in Brazil? - Reuters
RPT-Q+A-What foreign exchange reforms are brewing in Brazil?
Reuters
Brazil's foreign exchange legislation includes law 4595, which creates the central bank and gives the national monetary council the authority to formulate ...
and more »
Grey Horse Reports 2009 Results - MarketWatch (press release)
Grey Horse Reports 2009 Results
MarketWatch (press release)
Our foreign exchange business continued to grow, and we completed our acquisition of Toro FX Inc. -- the level of interest rates remained low, ...
and more »
Lone Star to resume $3.9 billion KEB stake sale: KEB - Reuters
Lone Star to resume $3.9 billion KEB stake sale: KEB
Reuters
KEB has strength in foreign exchange trading and trade financing, and employs 7500 staff. A buyer would be able to leverage KEB's foreign networks to head ...
and more »