Forex or For + Ex = Foreign exchange (or simply FX) is global, over-the-counter market (OTC) where participants, like retail traders, or big sharks from financial institutions buying and selling currencies. Forex is one of the largest trading markets, with a global daily turnover of more than US$5 trillion.
What is forex actually?
Forex trading is a simultaneous buying of one currency and the selling of other. Every trade goes through brokers. Currencies are traded in pairs, for example, Euro vs. US Dollars (EUR / USD), US Dollar vs. Japanese Yen (USD / JPY), US Dollar against Russian Ruble (USD / RUB) and so on. The main players of the market are: Governments and Central Banks, Commercial banks and companies, Hedge funds, Brokerage companies, Investors, Retail Forex traders, and Speculators.
In relation to other financial markets, such as New York, London, Madrid or Tokio, the forex market does not have a certain headquarters. There is also no specific central stock exchange. Forex market is the OTC over the counter market or the interbank market, which means that all trade is executed electronically in the network of banks. Forex market is open 5 days a week, from Sunday night until the end of Friday.
Because of the huge numbers of participants on the FOREX, it is all most impossible to manipulate on the market. You can watch and trade the currency pairs through the trading platforms, through your broker. One of the most popular platforms among the retail forex traders is MetaTrader4 or MT4 which you can download for free, and even learn to trade on the demo account.
What are the benefits of this market?
It is possible to perform large transactions with a small investment. You can be a participant in several markets at the same time.
You can limit your loss and profit by setting Stop Loss and Take Profit functions.
Other markets are limited by working hours while this is not the case on FOREX. You can trade 24 hours, 5 days a week.
In other markets, it is mostly earned when the price rises. You can trade on the FOREX even when prices are falling (short position)
Low-volume markets and a small trading volume are easily manipulated. However, on the Forex market, this is hardly feasible due to a large number of participants from around the world, as well as the large geographical area on which trade is conducted.
The most liquid market in the world.
The daily trading volume on the NASDAQ Stock Exchange in the United States is about $ 25 billion, while the average daily trading volume on the Forex is $ 5.5 trillion.
Only 5% of the daily trading volume in the financial market is attributed to government intervention and international companies. The rest of the trading is for speculative purposes.
80% of open positions are for 7 days or less.
40% of open positions are for 2 days or less.