The FX market

The foreign exchange market, also known as the FX market, or FOREX, is the global market of exchanging or converting one currency for another, this conversion is accomplished by selling one currency and buying another. The relative amount of each currency in the transaction is determined by the foreign exchange rate between the two currencies (also known as the currency pair). There is no formal exchange location where FX trading occurs. They are done OTC, or over-the-counter. The transaction of exchanging a currency pair takes place directly between two counterparties via telephone or electronic data link (trading platform). The counterparties for an FX transaction may be located anywhere in the world. These exchanges take place 24 hours a day from Monday morning in Australia, through Friday afternoon in New York. The size of the market and the ability to trade it worldwide, day or night provides the facilitation and liquidity that make FOREX an excellent investment opportunity.Speculating on the price changes between two currencies is what brings such large numbers of investors and traders to the FX market. The exchange rate is in constant fluctuation and is influenced by several different factors, including fundamental, technical and political. This affects one or both members of the currency pair, and therefore the relative supply and demand. Traders can make significant profits buying or selling a currency’s pair at one rate and then reversing or closing the transactions at a more favorable rate.

There is more speculation and trading opportunities in the FX market than in all other financial markets combined. Since trading in FOREX is a leveraged transaction, there is a significant opportunity to make a profit while maintaining a healthy risk/reward ratio. Leverage, liquidity and 24 hour facilitation all combine to make the FX market one of the premier investment vehicles available to investors and brokers alike.

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Written by admin on November 30th, 2007 with comments disabled.
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Disclaimer: Forex trading carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with currency Exchange trading.