So much more on " FOREX "

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The FOREX is the world’s biggest financial market.

The FOREX or “FOReign EXchange” is the planets biggest most liquid financial marketplace hands down.

Here is the Federal Reserve's easy to understand explanation of what the Foriegn Exchange is:

“Foreign exchange” refers to money denominated in the currency of another nation or group of nations. Any person who exchanges money denominated in his own nation’s currency for money denominated in another nation’s currency acquires foreign exchange.

That holds true whether the amount of the transaction is equal to a few dollars or to billions of dollars; whether the person involved is a tourist cashing a traveler’s check in a restaurant abroad or an investor exchanging hundreds of millions of dollars for the acquisition of a foreign company; and whether the form of money being acquired is foreign currency notes, foreign currency denominated bank deposits, or other short term claims denominated in foreign currency…Foreign exchange can be cash, funds available on credit cards and debit cards, traveler’s checks, bank deposits, or other short-term claims. It is still “foreign exchange” if it is a short-term negotiable financial claim denominated in a currency other than the U.S. dollar.” – Sam Cross – The Federal Reserve Bank

So now you can see why the the exchange of foreign currency is the planets biggest business.

In fact no other market even comes near the gargantuan size of this market. More money changes hands in the FOREX every day than all other markets on earth combined.
What is FOREX? Part II

It will take wall street ( the united states stock market) nearly 150 days to trade the same volume the Foreign Exchange market trades in just a single day.

As we have just learned, the Foreign Exchange is made up of anyone who exchanges the currency of one country for that of another.

However, for the purpose of this course, we shall focus on people and businesses who open trading accounts and attempt to realize profits from trading currency.

Throughout this tutorial, when we refer to the Foreign Exchange or "trading," it always pertains to traders and not tourists in a foreign country cashing travelers checks.

The FORiegn EXchange does not have a centralized exchange like the stock market in New York or the commodities markets with centralized exchanges in cities like New York and Chicago.

The FOREX rather is a world wide network of national governments, hundreds of banks, thousands of commercial institutions and hundreds of thousands of traders like you and I all linked together by computers, faxes, phones and other instantaneous forms of communication available in today’s high-tech society.

FOREX follows the sun around the world and is active 24 hours a day, six days a week.

At about 5pm EST Sunday afternoon the Asian session opens and trading starts non-stop going into the European trading session at about 2am EST and then the American session at 8am EST time until it makes full circle back to the Asian trading session never stopping, trading over a TRILLION dollars every single trading day.

So what exactly is being traded on FOREX?

The answer is money.

When you open a brokerage account and "trade" on the FOREX, you are speculating that the value of one countries currency is going to appreciate or depreciate in relation to that of another.

The currencies are always "paired up" just like two fighters in a boxing ring.

The most popular currency “pairs” traded on the FOREX are:

• The European Union “EURO” and the U.S Dollar which is expressed as EUR/USD
• The Great Britain Pound and the U.S. Dollar which is expressed as GBP/USD
• The Swiss Frank and the U.S. Dollar which is expressed as USD/CHF
• The Japanese Yen and the U.S. Dollar which is expressed as USD/JPY.
• Notice that the most traded currency pairs are traded against the USD.

Just about every currency in the world is traded on the FOREX but for the sake of simplicity we will only stick with the top four pairs or “majors.”

Why does one countries currency rise or fall in value against another?

There are many reason but some of the most influential are:

General condition of a country’s economy and economic influences like interest rates and inflation.
Political Factors
Trade Balance
Purchase Power Parity
Social Factors
Government and central bank policies and policy changes

A great analogy would be to compare a country with a company...



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