What is Forex or FX market? PART I
The foreign exchange market (also known as Forex or FX market) is the largest financial market in the world with over $ 1.5 trillion changing hands every day.
It is more important than all the U.S. Treasury and capital markets combined!
Unlike other financial markets that operate in a centralized location (ie stock exchange), the foreign exchange market around the world has no central government. This is a global electronic network of banks, financial institutions and individual traders, all involved in buying and selling of currencies. Another important feature of the Forex market is that it operates 24 hours per day, corresponding to the opening and closing of financial centers in countries around the world, starting each day in Sydney, then Tokyo, London and New York. At any time, any place, there are buyers and sellers, making the Forex market the most liquid market in the world.
Traditionally, access to foreign exchange has been available only to banks and other large financial institutions. With advances in technology over the years, however, the market is now available for everyone from fund managers to banks to retailers to commercial accounts. The time to participate in this exciting global market has never been better than now. Open an account and become an active player in the biggest market on earth.
The currency market is very different than trading currencies on the futures market, much easier than trading stocks or commodities.
If you realize it or not, that play a role in the Forex market. The mere fact that you have money in your pocket makes an investor in the currency, particularly in the U.S. dollar. By holding dollars, which chose not to hold the currencies of other countries. Your purchases of stocks, bonds or other investments with the money deposited into your bank account, investments that are highly dependent on the integrity of the value of their denominated currency ¨ the U.S. dollar. Due to the evolution of the U.S. dollar and fluctuations in exchange rates, investments in May change in value, affecting your overall financial situation. In this spirit, it is hardly surprising that many investors took advantage of fluctuations in exchange rates, using the volatility of the currency market as a means of increasing their capital.
Example: Suppose you had $ 1000 and bought Euros when the exchange rate was 1.50 euros per dollar. You can then Euro 1500. If the value of the euro against the dollar increased after selling (exchange) your Euros for dollars and have more money than you started with.
Example:
You can see the following:
EUR / USD 1.5000 means that the last operation
One euro is worth $ 1.50 in U.S. dollars.
The first currency (in this example, the euro) is considered the base currency and the second (/ USD), compared to currency trading.
The Forex plays a vital role in the global economy and there is always a great need to exchange currencies. International trade increases as technology and communication increases. While there is international trade, there will be a FOREX market. The foreign exchange market must exist if a country like Germany can sell products to the United States and be able to accept euros in exchange for U.S. dollars.
RISK WARNING:
Currency Risks
Net foreign exchange is a very risky investment and is only suitable for individuals and institutions capable of managing the risk of losses involved. An account with a broker can trade Forex highly leveraged (up to 400 times your account equity). The funds in an account that is to maximize the trade can be completely lost if the position (s) held in the account of the experience of one percent swing in value. Given the possibility of losing the entire investment, speculation in foreign exchange markets can not be done with risk capital funds that if lost will not affect significantly the well-be financial investors.