What is FOREX – The foreign exchange market (also known as the FOREX or FX market) is the largest financial market in the world, with more than $1.5 trillion changing hands every day.
That’s bigger than all the US stock and Treasury markets combined!
Unlike other financial markets, which operate in a central location (e.g. from an exchange), the global FOREX market does not have a central location. It is a global electronic network of banks, financial institutions and individual traders, all involved in the buying and selling of national currencies. Another key feature of the FOREX market is that it works 24 hours a day, which is equivalent to opening and closing financial centers in countries around the world, starting every day in Sydney, then in Tokyo, London and New York. Every time, everywhere, there are buyers and sellers, which makes the FOREX market the most liquid market in the world.
Forex Trading in the Forex Market
Traditionally, access to the FOREX market has only been granted to banks and other large financial institutions. However, with the advancement of technology over the years, the FOREX market is now available to everyone, from banks to asset managers to individual traders trading retail accounts. The time to engage in this exciting global marketplace has never been better than now. Open an account and become an active player in the largest market in the world.
The FOREX market is very different from trading currencies in the futures market and is much easier than trading stocks or commodities.
Whether you realize it or not, you are already playing a role in the FOREX market. The simple fact that you have money in your pocket makes you an investor in currencies, especially in US dollars. By holding US dollars, you have chosen not to hold another country’s currency. Purchases of stocks, bonds, or other investments, along with money deposited into your bank account, represent investments that rely heavily on the integrity of the value of the currency in which they are denominated — the US dollar. Due to changes in the value of the US dollar and the resulting fluctuations in exchange rates, your investments may change in value, which affects your overall financial status. With this in mind, it should come as no surprise that many investors have taken advantage of exchange rate fluctuations and taken advantage of the volatility of the foreign exchange market to increase their capital.
Example: Suppose you have 1000 US dollars and buy euros when the exchange rate is 1.50 euros to the dollar. You will then have 1500 euros. If the value of the euro rises against the US dollar, you will sell (exchange) your euros for dollars and have more dollars than you started with.
You may see the following:
Last trade EUR/USD 1.5000 means
One euro is worth $1.50.
The first currency (in this example, EURO) is called the base currency and the second currency (/USD) is called the counter or quote currency.
FOREX plays an important role in the global economy and there will always be a great need for currency exchange. International trade is increasing with the improvement of technology and communication. As long as there is international trade, there will be a FOREX market . A foreign exchange market must exist for a country like Germany to sell products in the United States and be able to accept euros in exchange for US dollars.
Forex Trading Risks
Trading FOREX on margin is a very risky form of investment and is only suitable for individuals and institutions who are able to cope with the potential losses associated with it. Accounts with brokers allow you to trade foreign currencies based on high leverage (up to about 400 times your account capital). Funds in an account traded with maximum leverage can be completely lost if the positions held in the account lose even one percent in value. Given the possibility of losing the entire investment, speculation in the foreign exchange market should only be carried out with venture capital funds, which, if lost, will not significantly affect the financial well-being of investors.