What is Forex?
Forex - A special financial market assigned for the foreign exchange.
Foreign Currency or as well as Currency exchange is very attractive for both the corporate and individual traders who make money on the Forex
The following features make this market mostly different in compare to all other sectors of the world financial system:
1. Heightened sensibility to a large and continuously changing number of
Factors;
2. Accessibility to all traders in the major currencies;
3. Guaranteed quantity and liquidity of the major currencies;
4. Increased consideration for several currencies, round-the clock business hours which enable traders to deal after normal hours or during national holidays in their country finding markets abroad open and
5. Extremely high efficiency relative to other financial markets. This goal of this manual is to introduce beginning traders to all the essential aspects of foreign exchange in a practical manner and to be a source of best answers on the typical questions as why are currencies being traded, who are the traders, what currencies do they trade, what makes rates move, what instruments are used for the trade, how a currency behavior can be foretasted and where the pertinent information may be obtained from. Mastering the content of an appropriate section the user will be able to make his/her own decisions, test them, and ultimately use recommended tools and approaches for his/her own benefit.
If you've ever traveled to another country, you usually had to find a currency exchange booth
at the airport, and then exchange the money you have in your wallet (if you're a dude) or purse
(if you're a lady) or man purse (if you're a metrosexual) into the currency of the country you
are visiting.You go up to the counter and notice a screen displaying different exchange rates for different currencies. You find "Japanese yen" and think to yourself, "WOW! My one dollar is worth 100 yen?! And I have ten dollars! I'm going to be rich!!!" (This excitement is quickly killed when
you stop by a shop in the airport afterwards to buy a can of soda and, all of a sudden, half
your money is gone.)When you do this, you've essentially participated in the forex market! You've exchanged one currency for another. Or in forex trading terms, assuming you're an American visiting Japan, you've sold dollars and bought yen. Before you fly back home, you stop by the currency exchange booth to exchange the yen that you miraculously have left over (Tokyo is expensive!) and notice the exchange rates have changed.It's these changes in the exchanges rates that allow you to make money in the foreign exchange market.
The foreign exchange market, which is usually known as "forex" or "FX," is the largest
financial market in the world. Compared to the measly $74 billion a day volume of the New York
Stock Exchange, the foreign exchange market looks absolutely ginormous with its $4 TRILLION a
day trade volume. Forex rocks our socks! Let's take a moment to put this into perspective using monsters...The largest stock market in the world, the New York Stock Exchange (NYSE), trades a volume of about $74 billion each day. If we used a monster to represent NYSE, it would look like this...
You hear about the NYSE in the news every day... on CNBC... on Bloomberg...on BBC... heck, you
even probably hear about it at your local gym. "The NYSE is up today, blah, blah". When people
talk about the "market", they usually mean the stock market. So the NYSE sounds big, it's loud
and likes to make a lot of noise. But if you actually compare it to the foreign exchange market, it would look like this...Check out the graph of the average daily trading volume for the forex market, New York Stock Exchange, Tokyo Stock Exchange, and London Stock Exchange:
The currency market is over 53 times BIGGER! It is HUGE! But hold your horses, there's a catch!
That huge $4 trillion number covers the entire global foreign exchange market, BUT retail
traders (that's us) trade the spot market and that's about $1.49 trillion. So you see, the
forex market is definitely huge, but not as huge as the media would like you to believe.
Do you feel like you already know what the forex market is all about? We're just getting
started! In the next section we'll reveal WHAT exactly is traded in the forex market.
WHY FOREX
There are many benefits and advantages of trading forex. Here are just a few reasons why so
many people are choosing this market:No commissions No clearing fees, no exchange fees, no government fees, no brokerage fees. Most retail brokers are compensated for their services through something called the "bid-ask spread". No middlemen Spot currency trading eliminates the middlemen and allows you to trade directly with the market responsible for the pricing on a particular currency pair. No fixed lot size In the futures markets, lot or contract sizes are determined by the exchanges. A standard-size contract for silver futures is 5,000 ounces. In spot forex, you determine your own lot, or
position size. This allows traders to participate with accounts as small as $25 (although we'll
explain later why a $25 account is a bad idea). Low transaction costs The retail transaction cost (the bid/ask spread) is typically less than 0.1% under normal market conditions. At larger dealers, the spread could be as low as 0.07%. Of course this depends on your leverage and all will be explained later.
A 24-hour market There is no waiting for the opening bell. From the Monday morning opening in Australia to the afternoon close in New York, the forex market never sleeps. This is awesome for those who want to trade on a part-time basis, because you can choose when you want to trade: morning, noon, night, during breakfast, or in your sleep.
No one can corner the market The foreign exchange market is so huge and has so many participants that no single entity (not even a central bank or the mighty Chuck Norris himself) can control the market price for an extended period of time.