FOREX - Where Fortunes Are Made Everyday

The Foreign Exchange Market ? better known as FOREX - is a world wide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Daily exchanges are worth approximately $1.5 trillion (US dollars). In comparison, the United States Treasury Bond market averages $300 billion a day and American stock markets exchange about $100 billion a day.

The Foreign Exchange Market was established in 1971 with the abolishment of fixed currency exchanges. Currencies became valued at 'floating' rates determined by supply and demand. The FOREX grew steadily throughout the 1970's, but with the technological advances of the 80's FOREX grew from trading levels of $70 billion a day to the current level of $1.5 trillion.

The FOREX is made up of about 5000 trading institutions such as international banks, central government banks (such as the US Federal Reserve), and commercial companies and brokers for all types of foreign currency exchange. There is no centralized location of FOREX ? major trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Paris, and Frankfurt, and all trading is by telephone or over the Internet. Businesses use the market to buy and sell products in other countries, but most of the activity on the FOREX is from currency traders who use it to generate profits from small movements in the market.

Even though there are many huge players in FOREX, it is accessible to the small investor thanks to recent changes in the regulations. Previously, there was a minimum transaction size and traders were required to meet strict financial requirements. With the advent of Internet trading, regulations have been changed to allow large interbank units to be broken down into smaller lots. Each lot is worth about $100,000 and is accessible to the individual investor through 'leverage' ? loans extended for trading. Typically, lots can be controlled with a leverage of 100:1 meaning that US$1,000 will allow you to control a $100,000 currency exchange.

There are many advantages to trading in FOREX.

· Liquidity - Because of the size of the Foreign Exchange Market, investments are extremely liquid. International banks are continuously providing bid and ask offers and the high number of transactions each day means there is always a buyer or a seller for any currency.

· Accessibility ? The market is open 24 hours a day, 5 days a week. The market opens Monday morning Australian time and closes Friday afternoon New York time. Trades can be done on the Internet from your home or office.

· Open Market ? Currency fluctuations are usually caused by changes in national economies. News about these changes is accessible to everyone at the same time ? there can be no 'insider trading' in FOREX.

· No commission ? Brokers earn money by setting a 'spread' ? the difference between what a currency can be bought at and what it can be sold at.

How does it work?

Currencies are always traded in pairs ? the US dollar against the Japanese yen, or the English pound against the euro. Every transaction involves selling one currency and buying another, so if an investor believes the euro will gain against the dollar, he will sell dollars and buy euros.

The potential for profit exists because there is always movement between currencies. Even small changes can result in substantial profits because of the large amount of money involved in each transaction. At the same time, it can be a relatively safe market for the individual investor. There are safeguards built in to protect both the broker and the investor and a number of software tools exist to minimize loss.

Copyright 2005. William McNutt. All rights reserved

This article may be freely distributed and reprinted as long as the author's information and web link are included at the bottom of the article.

Authored by:
William McNutt
Investment Made Easy

Bill McNutt is a retired Areospace Engineer. Retirement got boring so he took up web page building. He spends most of his time working on websites and writing articles.

Home Loans Made Easy
Which is Better Sauna or Steam Bath

---

What I Learnt Losing £60,000 My First Year as a Full-time Trader

During my first year as a local (independent trader) on... Read More

Where is the Market Going?

If you ask me whether the market will have moved... Read More

Online Forex Trading

Foreign exchange currency trading is also known as Forex trading,... Read More

A Beginner?s Guide to FOREX

FOREX is the abbreviation for the Foreign Exchange market. FOREX... Read More

The Yin and the Yang of Markets

I am reading a fantastic book on trading, first published... Read More

Example of a Profitable Transaction in FOREX

To make a profit, in the FOREX, a trader can... Read More

Forex Market Overview

"FX" is an abbreviation of "forex" or "foreign exchange." Foreign... Read More

Forex Broker Involvement Optional

To trade on the forex market, the largest financial market... Read More

6 Critical Factors For Successful Trading

Success in any profession can be broken down into a... Read More

Trading Profitably on the Foreign Exchange Market

You may be asking yourself "how does one begin to... Read More

A Short Introduction To FOREX

FOREX is the world's largest and most liquid trading market.... Read More

Day Trading Course or Day Trading Technique Seminar: Learn Day Trading Education

Profitable day traders recognize that momentum trading is among the... Read More

The Miracle of Forex

My father, who owns a small parts store and garage... Read More

A Fools Game

I received an email this week with a question (below)... Read More

Psychology Of Trading

The psychological aspect of trading is usually underestimated by those... Read More

Stocks Trading - Advantages and Disadvantages

What is Stocks Trading?Companies throughout the world issue new stock... Read More

Online Forex

Q1: When you consider that the foreign exchange market has... Read More

The Secret of Reduced Margin Spreads

One of the best kept secrets in trading is that... Read More

Business and the Forex

The business world is a complex web of supply and... Read More

Reality of Online Forex Trading

Foreign exchange trading is the trading of currencies. Most currencies... Read More

Forex Scams: How to Spot Them A Mile Away

In recent years, investors have witnessed increased number of investment... Read More

Sending Signals for Trading in Forex

Forex signals are sent by a forex firm to their... Read More

Money Management, Part 1

There are some common mistakes I've seen traders make in... Read More

Discovering Turnaround Candidates

There are many types of investment methodology out there. All... Read More

Experience

Throughout our course on futures trading, we have tried to... Read More