The Foreign Exchange Market

Foreign Exchange market or Forex Market is a place where countries currency can be exchanged for that of another. Few decades back if a private trader need to participate in forex market then his only choice is through banks which transacts huge amount of currency for several purposes like commercial, investments etc.

The amount of money traded in foreign exchange market increased tremendously after exchange rates where allowed to move freely based on Supply and Demand which happened in 1971. The largest financial market in the world is said to be Forex Market. It is several times larger than all US Equities, futures, commodities combined. The daily turnover is over $5.3 trillion which makes it stands apart from all other financial markets.

Despite being the huge market it is continue to grow in much faster pace. Leading Currency Expert from Financial Times have mentioned in his research that the daily turnover of the market will be doubled in next three years.

Decentralized Forex Market

Foriegn Exchange market is an Over The Counter Market or OTC Market. It is because there is no location or central exchange which controls the market. In case of Stocks there are regulatory board and Exchanges. But in case of forex it operates through banks, market makers and corporation around the globe. This makes the market 24 hours traded round the clock in all time zones.

What is Traded?

Currencies are traded. Buying and Selling of currencies can be done in Forex Market. You will be selling a currency and buy another currency using the agreed exchange rate which looks like EUR/USD=1.29
So here if you need to buy Euro then you have to give (sell) 1.29 USD. Most traded currency pair is EURUSD followed by USDJPY, GBPUSD and AUDUSD. There are several currency pair like these which can be traded. All currency pair which include US dollar is called major pairs and those are traded by majority of traders.

How to trade?

It became easy to trade currencies through online. You can trade using the Online trading Platform provided by your forex broker. the most widely used trading platform is Meta trader4. But there are also many other platform which is used by traders as an alternative for meta trader. Some of them are FXCM trading station, Meta trader 5, Ctrader , tradeable, etc These trading platforms also provide a funtionalty to trade using virtual currency. This is for learning purposes.

Before 1989 the access to foriegn exchange market was limited only to large market players such as banks, hedge funds, central banks. Now the Internet and online trading platform made it possible for everyone to access similar level of liquidity as banks.