The Forex Market

The Foreign Exchange market, also called the "FOREX", is the world's largest financial market. With a daily volume of over US$4 trillion it is more than three times the size of the various stocks and futures markets combined.

Just as stocks and shares are traded on the stock exchange, money is traded on the foreign exchange market.

Forex trading involves the simultaneous buying of one currency and the selling of another. Nothing physical is bought or sold. There is no actual delivery of the currencies you buy.

Let's consider how goods trading differs from currency trading.

With goods trading, when we buy, we give money in exchange for goods. When we sell, we get money in exchange for goods. But with currencies, we buy and sell simultaneously. We get one currency for another.

About 5% of daily trading volume comes from companies and governments that buy or sell goods and services in a foreign country, or convert profits made in foreign currencies into their domestic currency. The other 95% trade for profit. These are the speculators. Traders like you and me.

Currencies are traded in pairs. For example, the Euro dollar and the US dollar (EUR/USD) or the British pound and the Japanese Yen (GBP/JPY).

The FOREX market is considered an Over-the-Counter (OTC) or 'interbank' market. Unlike the New York Stock Exchange and other financial markets, the forex market has neither a physical location nor a central exchange. Transactions are conducted between two counterparts over the telephone or via an electronic network. The entire market is run electronically, within a network of banks, continuously over a 24-hour period. The trading day begins in Wellington (New Zealand), and moves around the globe as the business day begins in each financial center, first to Sydney, Tokyo, London, and New York.

Until the late 1990s, only big institutional investors traded forex. You needed tens of millions of bucks to start with. Over the last several years the market has witnessed a dramatic evolution, with independent brokers offering access to the forex market via internet-enabled trading platforms. Individual investors are now tapping into the FX market with access to the same market data and tools used by institutions, hedge funds and professional traders.

All you need to get started is a computer, a stable and high-speed Internet connection, and ForexCalling.com to help you trade profitably.