Forex trading and market

What Is Forex?

FOREX market (FOReign EXchange market) is an inter-bank market of exchanging one currency to another, which was formed in 1971, when international trade switched from fixed rate of exchange to floating one. This is a totality of transactions of foreign exchange market agents on the exchange of specified sums of one country's monetary unit to the currency of other country according to coordinated rate for a fixed date. When exchanging, rate of one currency relatively to the other is very simply defined: by a demand and supply - exchange, which both sides agree for.

Scope of world-wide foreign exchange market transactions are constantly growing. It is connected with the development of international trade and the removal of exchange restrictions in many countries. Daily scope of conversion transactions in the world in the middle of 1998 constituted 1 trillion 982 billions US dollars (to the share of London market falls about 32 % of daily turnover, New York exchanged about 18 %, German market - 10 %). The impressive thing is that not only the scope of transactions but also the rates, which mark the development of the market: in 1977 daily turnover made up 5 billions US dollars, per 10 years it increased till 600 billions and reached one trillion dollars in 1992. About 80% of all transactions comprise speculative operations, having the goal of profit extraction from speculation on a difference of exchange rates. This speculation attracts a lot of participants: either financial organizations or individual investors.

The purpose of FOREX market as a place of adoption of personal financial, intellectual and psychic power is not at all in the attempt to catch a bluebird of happiness there. Sometimes somebody succeeds in this but not for long. The main advantage of the foreign exchange market is that it is possible to achieve a stable success namely by power of the intelligence. The foreign exchange market is round-the-clock; it is not connected with fixed working hours of exchange; trade is taking place in different parts of the globe. Agility of currency rates is such that considerable changes occur very often and this allows making several transactions every day. If you have an outgoing reliable trading technology, it is possible to make business, which is more effective that any other. Not without reason the largest banks buy expensive electronic equipment and support staff of hundreds of traders, trading in different sectors of exchange market.

Main currencies, to which share falls the principal scope of all transactions on the FOREX market, are today US dollars (USD) - main currency, euro (EUR), Japanese yen (JPY), Swiss franc (CHF) and British pound sterling (GBP).

Deals of currency purchase and sale, which are actually carried out (valuation of currencies) the second working day after striking a bargain, are called spot type transactions or current conversion transactions. According to information of the 1998, Spot-market accounts for about 40% of all activity.

As it was already said, daily turnover of FOREX market amounts to 3 trillions dollars. For comparison: daily turnover of American Stock Exchange makes up about 300 billions of dollars. New York Stock Exchange requires half of a year to achieve a daily turnover of foreign exchange market.

FOREX is not a "market" in a traditional meaning of this word. It has no common centre, it has no concrete place of trade and this means that it cannot be closed at the command. Trade takes place by the phone and through computer terminals simultaneously in hundreds of banks all over the world. Hundreds of millions of dollars are sold and purchased every several seconds and it makes up the essence of so called currency trading.

FOREX combines four regional markets: Asian, European, American, and Australian. Exchange transactions do not cease during the whole working week, the market works 24 hours per day. Relative quiet spot on the FOREX market are to be observed from 23:00 till 4:00 according to Moscow time. It is connected with the point that Tokyo Exchange opens at 4 o'clock in the morning and closes at 23 hours.

Taken from FFG-traders.biz