What is Forex?


Forex (Foreign EXchange market) – the international exchange market where one currency bought and sold for the other. This is – one of the biggest markets in the world.

Today, the Forex market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions.

Some of the participants in this market simply seeking to exchange foreign currency for their own or on the contrary, such parties are, for example, transnational corporations, which must pay wages and other costs in some countries, selling products to others. However, much of the market consists of the currency speculators who profit from changes in exchange rates.

Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX / YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For instance, EUR / USD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar.

On the spot market, according to the BIS study, the most heavily traded products were:
EUR / USD: 27%
USD / JPY: 13%
GBP / USD (also called sterling or cable): 12%

The foreign exchange market is unique because of its trading volumes, the extreme liquidity of the market, its geographical dispersion. A feature of Forex is that the foreign exchange market work 24 hours a day during the working week between people and Forex-brokers, brokers and banks and between banks themselves. At Forex traders can react to the news when they occur, rather than wait for the opening of the market, as is the case with most other markets.

Like any market there is a bid / offer spread (difference between buying price and selling price). On major currency crosses, the difference between the price at which a market maker will sell ( “ask”, or “offer”) to a wholesale customer and the price at which the same market-maker will buy ( “bid”) from the same wholesale customer is minimal, usually only 1 or 2 pips. In the EUR / USD price of 1.4238 a pip would be the’8 ‘at the end. So the bid / ask quote of EUR / USD might be 1.4238/1.4239.

This, of course, does not apply to retail customers. Most individual currency speculators will trade using a broker which will typically have a spread marked up to say 3-20 pips (so in our example 1.4237/1.4239 or 1.423/1.425). The broker will give their clients often huge amounts of margin, thereby facilitating clients spending more money on the bid / ask spread.

Discover the Forex! Forex is a real opportunity for you to become one of the participants in the foreign exchange market and use all its advantages for your profit over the 24-hour trading day on the market.


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