The Forex market, established in 1971, was created when
floating exchange rates started to materialize. It relates
to the foreign exchange market, where brokerage firms and
banks are linked over an electronic network that allows
them to exchange the currencies of countries around the
globe. The Forex market is not centralized, like in
currency, futures or stock markets. Trading occurs over
computers and phones at thousands of locations globally.
The Foreign Exchange market, usually referred as forex, is
where banks, capitalists and speculators exchange one
currency to another. The largest foreign exchange activity
retains the spot exchange among five major currencies: US
Dollar, British Pound, Japanese Yen, Eurodollar and the
Swiss Franc. It is also the biggest financial market in the
world. In comparison, the US stock market may trade $10
billion in one day, whereas the Forex market will trade up
to $2 trillion in one single day. The Forex market is an
opened 24 hours a day market where the primary market for
currencies is the 24-hour Interbank market. This market
follows the sun around the world, moving from the major
banking centers of the United States to Australia and New
Zealand to the Far East, to Europe and ultimately back to
the Unites States.
There are three main causes to participate in the Forex
market. One is to facilitate an actual transaction, whereby
international corporations convert profits made in foreign
currencies into their domestic currency. Corporate
treasurers have their own forex trading strategies so they
also get into the Forex market in order to hedge against
undesirable exposure to future price movements in the
currency market. The third and more popular reason is
speculation for profit. In fact, today it is estimated that
less than 5% of all trading on the Forex market is actually
helping a true commercial transaction.
Forex trading system views forex market as an Over the
Counter (OTC) or ‘Interbank' market, due to the fact
that transactions are carried on between two counterparts
over the telephone or via an electronic network. Trading is
not centralized on an exchange, as with the stock and
futures markets. In this big forex trading system forex
trading starts each day in Sydney, and moves around the
globe as the business day begins in each financial center,
first to Tokyo, London, and New York. Unlike any other
financial market, investors can react to currency
fluctuations caused by economic, social and political
consequences at the time they occur - day or night.
So far, professional traders from major international
commercial and investment banks have ruled the Forex
market. Other market participants range from large
multinational corporations, global money managers,
registered dealers, international money brokers, and
futures and options traders, to private speculators. The
Forex market is called an ‘Interbank' market due to
the fact that historically it has been dominated by banks,
including central banks, commercial banks, and investment
banks. However, the percentage of other market participants
is rapidly growing, and now includes big multinational
corporations, global money managers, registered dealers,
international money brokers, futures and options traders,
and private speculators.
Forex trading system is the biggest financial market in the
world, with a daily average turnover of approximately
US$1.2 trillion. The world's currencies are on a floating
exchange rate and are always traded in pairs, for example
Euro/Dollar or Dollar/Yen. Approximately 80% of all Forex
trades close seven days or less and more than 40% last
fewer than two days. As a universal rule, a position is
kept open until one of the following occurs: realization of
enough profits from a position, the specified stop-loss is
triggered, another position that has a better potential
appears and you require these funds.
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Andrew Daigle is the creator, owner and author of many
successful websites that include Free Forex Training
Resources called ForexBoost at http://www.ForexBoost.com
and the sister Forex blog
http://forex-trading-system.typepad.com
