What is FOREX?

The Foreign Exchange Market, better Known as FOREX, was established in 1971 when fixed currency exchanges were abolished. Currencies became valued at ‘floating’ rates determined by supply and demand. The FOREX grew steadily throughout the 1970’s, but with the technological advances of the 80’s FOREX expanded from trading levels of $70 billion a day to the current level of $2.6 trillion.
The Foreign Exchange Market, is a worldwide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Daily exchanges are worth approximately $2.6 trillion (US dollars).

Market Overview

The Forex market, or foreign exchange market, or FOREX, or FX market, is a non-stop cash market where currencies of nations are traded, typically through brokers. The simple sense of Forex is simultaneous purchase and sale of the currency or the exchange of one country's currency for the one of another country. The world currencies do not have a fixed exchange rate and is always fluctuating being traded in the currency pairs like Euro/Dollar, Dollar/Yen and others.
Prices in the Forex market fluctuate without any dramatic changes unlike stock market where considerable gaps are likely to be seen. There isn't any problems entering and exit the market due to its daily turnover of about $1.9 trillion.

What Drives the Forex market?

It is a known fact that different countries use different currencies; however cross-border has to take place. The FOREX is therefore a vehicle driven by the need to move monetary payments across border and transfer funds and value from one currency to another. If the whole world used one currency there would be no need for the FOREX market. For example if a US restaurant needs to buy Italian cheese it needs Euros to pay the Italian cheese maker so it must be able to exchange US dollars for Euros. Likewise if the US restaurant makes the payment in US dollars the Italian cheese maker must be able to exchange the dollars into Euros. It's as simple as that.

What is traded on the Foreign Exchange?

Forex transactions are carried out by Forex brokerage companies, also known as major banks dealers. Forex market is worldwide and your European colleagues may make a transaction with Japanese traders when it's time for you to sleep in the North America. There are 3 shifts for the major institutions to work in due to 24-hours a day activity of the Forex market. It's possible to ask for overnight execution for take-profit and stop-loss orders of the client.

Trading from home

Forex can be traded from anywhere. Take your laptop with you and you can trade the FOREX and make money anywhere in the world where you have an internet connection. FOREX Trading is not bound to any one trading floor and is not centralized on an exchange, as with the stock and futures markets. The FX market is considered an Over-the-Counter (OTC) or 'Interbank' market, due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period.

What is the Spot market?

The spot market or cash market is a commodity or securities market where goods, both perishable and non-perishable, are sold for cash and delivered immediately or within a short period of time. Contracts bought and sold on these markets are immediately effective. Purchases are settled in cash at the current prices set by the market, as opposed to the price at the time of delivery. An example of a spot market commodity that is regularly sold is crude oil; it is sold at the current prices, and physically delivered later. Spot markets can operate wherever the infrastructure exists to conduct the transaction. The spot market for most securities exists primarily on the Internet.

Which Currencies Are Traded?

• EUR: Euros
• USD: United States dollar
• CAD: Canadian dollar
• GBP: British pound
• JPY: Japanese yen
• AUD: Australian dollar
• CHF: Swiss franc
• NZD: New Zealand dollar

When does Forex trading occur?

Most of Forex transactions have a settlement date when the currencies are due to be delivered. You must roll the position over to the next settlement date, if you want to keep your position open beyond the settlement date. Some dealers roll open positions over automatically, while other dealers may require you to request the rollover. Most dealers charge a rollover fee based on the interest rate differential between the two currencies in the pair. You should check your agreement with the dealer to see what, if anything, you must do to roll a position over and what fees you will pay for the rollover.

The Forex market (OTC)

The OTC market is the biggest and most popular financial market in the world, traded universally by a large number of individuals and organizations. In the OTC market, participants determine who they want to trade with depending on trading conditions, attractiveness of prices and reputation of the trading counterpart.
The main merits of the FOREX market are:

• 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 24 hours a day, every working days;
• A trader can open a position for any period of time he wants;
• No fees, except for the difference between buying and selling prices;
• An opportunity to get a bigger profit that the invested sum;
• Qualified work in the FOREX market can become your main professional activity;
• You can make deals any time you like.

Why is Forex so popular?

Forex trading is fast becoming many short term traders' preferred investment choice. It may be necessary to explain what Forex trading is. Forex trading, also called currency trading, FX trading, Foreign Exchange trading and Forex currency trading refers to the largest financial investment market in the world.
The reason for this is that the day trader buys at the beginning of the market for that day and then sells off all that he or she had bought by the end of the day. There is potential to make a lot of money on the Forex market, but it takes a person knowledgeable in all the different aspects of this slippery exchange to make money. A novice to this market can easily be wiped out in a matter of minutes.