The Foreign Exchange Market - more commonly known as FOREX is a global market for trading currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Daily exchanges average approximately $2 trillion ( US dollars). The Foreign Exchange Market was established in early 1970s with the abolishment of fixed currency exchanges under President Nixon. Currencies became valued at ‘floating’ rates determined by supply and demand. The FOREX is made up of about 5,000 trading institutions such as international banks, central government banks ( such as the US Federal Reserve ), and commercial companies and brokers for all types of foreign currency exchange. There is no centralized location for the FOREX - major trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Pars, and Frankfurt. Businesses use the market to allow them to buy and sell products in foreign countries. However, most of the activity on the FOREX is from currency traders who use it to generate profits from small movements in the in the market,
There are many advantage of trading in FOREX.
1. Liquidity - Because of the size of the FOREX, investments are extremely liquid. International banks are
continuously providing bid and ask offers and the high number of transactions each day means there is always a buyer and or a seller for any currency.
2. Accessibility - The market is open 24 hours a day , 5 days a week. The market opens Monday morning Australian time and closes Friday afternoon New York time. Trades can be done on the Internet from any location.
3. Open Market - Currency fluctuations are usually by changes in national economies. News about changes is accessible to everyone at same time - there can be no ‘ insider trading‘ in FOREX.
FOREX is the largest financial market in the world. The huge volume of FOREX means that its is ine of the most liquid markets in the world.
Risk of Forex Trading : Despite the claims you may see on some Forex web sites, Forex is not risk_free. You are trading with large sum of money and there is always a possibility that trades will go against you. There are several trading tools, however, that can minimize you risk, and with caution, and above all education, the Forex trader can learn how to trade profitably while minimizing losses. Forex trader should have strategy, knowing when to enter and exit the market and what kind of movements to expect. DO NOT place money in the Forex that you cannot afford to lose.