Learning Center - Forex Basics
Forex vs. Futures
History of The Foreign Exchange Market
The Foreign Exchange market, also known as
the "FX" or "Forex" market, is the biggest
financial market anywhere in the world. The
daily average turnover is over $1 trillion
US -- a volume more than thirty times the
size of all U.S. equity markets combined.
"Foreign Exchange" occurs when one currency
is bought at the same time another is sold.
Currencies are always traded in pairs: e.g.,
EUR/USD (Euro & US Dollar) or USD/JPY (US
Dollar & Japanese Yen.)
Around 5% of turnover each day is from
governments and companies that buy and sell
services or products in a foreign country or
that convert foreign currency profits into
domestic currency. The other 95% is trading
for speculation.
For speculators, most popular
forex trade options are the Majors, or
the most commonly traded currencies. The
Majors include the US Dollar, Canadian Dollar,
Australian Dollar, Japanese Yen, Swiss Franc,
Euro, and British Pound. Today, more than 85%
of all daily transactions involve trading of
the Majors.
Forex trading is a true 24-hour market, beginning
in Sydney every day and circling the globe as
the work day starts in each financial center:
Tokyo to London to New York. Unlike other
financial markets, forex investors are able to
respond to fluctuations in currency, whatever
the reason, via online currency exchange or
other telecommunication options 24 hours a day.
The forex market is considered an interbank or
over the counter market because the transactions
take place over the phone or through
online currency trading. There is no central
currency exchange, unlike with the futures or
stock markets.
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