What is Forex?
The FOReign EXchange market is the largest financial market in the world. 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.
The average daily turnover in the global Forex markets is currently around US$ 3.2 trillion. FX trading has many advantages over equities as the foreign exchange market is open 24 hours a day and there is greater liquidity. 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.
Investors buy these currencies on the speculation that the currency purchased will increase in value. This increase in value occurs due to changing economic conditions of the countries involved. Real time daily events affect the stability of a currency, therefore the prices constantly change.
24 hour market. Seeing as the market is worldwide, as long as there is a market open somewhere in the world trading can take place. The markets open in Australia on Sunday night and close in New York at close of business on Friday.
Ability to profit from both rising and falling markets. Falling and volatile market offer opportunity for large profits. The Forex market has no restrictions on directional trading.
High Liquidity. Liquidity is the ability to turn an asset into cash. When trading in money the asset is cash.
