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What is Forex?
by Jareth Carter
http://www.forexjoy.com
The Forex Exchange Market is also known as FX. FX
is the largest exchange market in the world. The
1998 thorough study of the Forex Market showed a
global turnover of $1.4 trillion daily. That data
represents an 80% increase from the 1992 global
turnover.
Since this is such a huge market it~s obviously
controlled by very large financial institutions
and commercial banks. Investment banks, money
centers and central banks have a huge role in the
Forex Market. Vast solo transactions of anywhere
from $200 to $500 million are very frequent in
such a marketplace.
Even though the Forex market is a global one,
Great Britain is the epicenter for currency
exchange. Its prime location allows its markets to
open when both the Asian and American markets are
open. Great Britain alone accounts for about 30
percent of the daily activity in the market and a
reported 213 foreign exchange institutions
reported activity to the Bank of England in 1998.
Even the United States, with 93 foreign exchange
dealers only accounts for 18 percent of daily
activity, which comes a distant second to Great
Britain.
Global currencies are exchanged in the Forex
market and traded in pairs. When you look at a
quote, the first currency is always the base. The
US Dollar typically acts as the base currency in a
trade. The exceptions are with the Australian
Dollar, the British Pound and the Euro.
The Forex is an over the counter market meaning
that there is no exchange floor as there is with
stocks, bonds, futures and options. But rather,
trades occur directly between market operators
like stock brokers and those placing the order
(the customer). Trades for stocks are processed
via an electronic network or over the telephone
once again broker to broker or broker to
customers. Trades occur in the major financial
centers which are located in Sydney, Hong Kong,
London, and New York.
Now not only can you trade stocks but you can
trade currency. There are different reasons for
this and for wanting to do this. You typically
will trade one currency for another with the hopes
that the one you trade for will go up from what
you paid for it and you will make a profit. It is
important to keep in mind that there is always a
risk involved when investing with currency but it
could pay off big for you.
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