FX Market

“Forex” is a combination of the words “foreign exchange”. The Forex market deals in the buying and selling of currency and it is the largest financial market in the world. Currency is always traded in pairs. The price of the currency bought as compared to the price of the currency sold is called the exchange rate. The Forex market is often referred to as the “FX” market.

It has a major difference that sets it apart from other markets in that it has no physical location and no central exchange. It operates through an electronic network of banks, corporations and individuals who engage in this type of trading. The lack of a physical exchange makes the Forex a true 24-hour market that extends from one time zone to another without any interruption in trading.

Forex trading begins each day in Sydney, followed by Tokyo, London, and New York. Unlike other financial markets, Forex investors can respond to currency fluctuations caused by economic, social and political events in real time.

The best trading opportunities are usually considered to be the currencies that are the most commonly traded. Their rapid movement makes them the most liquid. Over 85% of all daily transactions involve the buying and selling of these currencies that are sometimes referred to as the “Majors”. They include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.

The Forex market is considered an Over The Counter (OTC) market because transactions are conducted between two entities either over the telephone or through an electronic network.

There are some specific reasons why entities trade in the Forex market. The most common is to earn short-term profits from fluctuations in exchange rates. Traders also use the market to acquire the foreign currency necessary to buy goods and services from other countries.