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A Brief Glimpse into the Forex MarketWhat is forex? Well, forex stands for foreign exchange, and it’s one of the biggest trading markets in the world, with perhaps $1-2 trillion dollars traded every single day. Compare that to the $25 or so billion dollars traded at the New York Stock Exchange. So, how does forex currency trading work exactly?
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The forex market is similar to the stock market in way. In the stock market you’re buying shares and “investing” in a company, with the hope that the company will grow and prosper, which is turn will mean your shares increase in value. In the forex market you’re buying currency, and in a sense “investing” in a country’s economy. If the economy of a target country is healthy, the currency increases in value; with the forex trader making a profit on the “spread” or difference between the buying/selling prices of different currencies. All currencies can be traded, but trading requires you to monitor at least two countries economies simultaneously; so many traders stick to what are called the “major currencies”. These are United States Dollars (USD), Great British Pounds (GBP), the Euro and Japanese Yen (JPY). In addition to these are Swiss Francs (CHF), Canadian Dollars (CAD) and Australian Dollars (AUD). Since the forex market isn’t located in any one location, and is run electronically through telecommunications networks to centres in every country; trading occurs 24 hours a day, from Monday 0:00AM GMT till Friday 10:00AM GMT. The forex market was established in 1971, but it wasn’t until the 21st century with the advent of computers and high-speed internet that trading became an option for average citizens with a low investment capital. Before that time, forex trading was limited to big companies with perhaps millions with which to invest.
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