Forex Corporation
What is the Forex Market?
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.
About the Author
Andrew Daigle is the creator, owner and author of many successful websites that include Free Forex Training Resources called ForexBoost, a free Forex educational site for learning Forex trading strategies and a ForexBoost blog for additional Forex trading education.
Forex Corporation
Why aren’t more people trading in the forex?!?
2 trillion dollars traded each and every day. 400:1 on your money. Currency is not easily manipulated, unlike corporations. With proven systems available to the average Joe, why is this forum not loaded with questions pertaining to the foreign currency exchange market?
All trading is tough. The previous posters cite the 90% of forex traders lose money. True. But they fail to tell you that 90% of people trading equities lose money also. Trading, whether it’s equities, fx or futures is tough. Actually, I think the numbers are 90% for equities and 97% for futures/forex traders.
The first poster that said to trade currency futures is insane. Futures contracts possess the potential for unlimited losses. Like the one poster said, you can lose 100% in fx, but you can loss 200% in futures. I’ve seen several instances of futures traders losing their entire account and then having to cough up more money to cover the losses above what was in their account. If you have a $10,000 futures account, you could realistically lose $50,000 on a trade that goes horribly wrong and you’d have to come up with an additional $40,000 to cover the loss above the $10,000 in your account. In fx, you can only lose your entire account.
I am an fx trader and I love it, but I don’t think it’s for everyone. It bothers me when a person knocks a specific investment vehicle because they don’t like it or it doesn’t fit their investment style. I don’t like medicine. The hours are long, the field is tough, but I wouldn’t go knocking being a doctor. Because it’s not what interests me or what I want to do doesn’t mean it’s a bad occupation. There are people out there that love medicine and are geniuses in the field. It’s good for them, but it’s not good for everyone.
The same thing with investments, I love the high risk markets, but only a small percentage of the population are suited for them. Doesn’t make them bad.
I really wish people would stop being so judgmental about things they don’t like or don’t understand. If forex trading is not for them, then they should just say, “Hey, I don’t like it, but that’s me”, instead of making it out to be an evil that EVERYONE should stay away from.
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