Forex, Foreign Exchange Market, is where currencies are traded, including buying, selling and exchanging currencies at determined prices.
Currencies increase and decrease in value just as stocks do – supply and demand.
A Forex trader will sell U.S. dollars if he/she sees them weaken against the Euro. The trader will buy euros and if they strengthen he/she can buy back more U.S. dollars than the trader had had originally and make a profit.
So long as the central banks don’t intervene with currency moves, the Forex market is the closest to dealing perfect competition.
Currency trading is easier than stocks because there are only eight countries you need to keep an eye on rather than thousands of stocks so if you keep up to date with the political and economical news from those countries you will keep on top of your financial trading.
The stock markets can also drop in activity and size and become still. And if the market falls it is hard to make a profit unless you are very experienced.
However the Forex currency market is much more flexible in that you don’t get stuck in the same rut as you would with stocks because Forex movable and in high control, whereas the margin is low.
And the commissions for the stock market are far greater than that of the Forex market.
These currency exchanges are going on continuously around the world in trade, five and a half days a week, no weekends, 24 hours a day. Euros are exchanged for U.S. dollars and U.S. dollars are exchanged for the English pound, etc.
This is why there is a need for financial markets and trading is done worldwide in centres of the main financial cities across most time zones, including London, Paris, Sydney, New York, Frankfurt, Singapore, Zurich and Hong Kong.
This goes on through a computer networking system where the value estimates are regularly changing.
The Forex market is the biggest financial market in the world. It towers over the stock market. Although the total volume is changing all the time, the average stock market trading is around U.S.D. 2 billion daily, but the Forex market will trade in excess of 5 trillion a day.
The spot market is what Forex is most renowned for. Due to electronic trading it has become more popular than the futures and forwards markets.
Currencies are influenced throughout the world by political circumstances, the economy and present interest rates, so in the spot markets, currencies perform against one another in real time.
Whereas the forwards and future markets deal in a specific price for settlement in a future time and deal in contracts rather than currencies. They are used mostly by companies and International corporations.
New traders and investors will find there is more ways to be involved in the foreign exchange with many new features in the Forex market. They can go to a free trading beginners guide at: http://www.learntotradethemarket.com/forex-university
For maximum profit and protection the futures and spot markets can be traded together by combining the 2 Forex transactions.
An introduction on interpreting quotes, spreads, roll-overs and margins and how to move equities to currencies can be found here: http://www.forextraders.com/learn-forex-trading-course/currency-pairs-understanding-and-reading-forex-quotes.html
After shared funds, banks and portfolio managers, hedge funds collection of players are the one of the biggest on the Forex market. Large accounts like endowments and pension funds have their currencies traded by investment managers.
Because Forex trading is so large it impacts business around the world on a global market, you could get a company such as CMC that provides a service to help you through your investments and guide you along the way.
Although the economy largely dictates the currencies, often a large movement in a certain currency can dictate the wealth of the economy.
An important factor in a central bank’s operation is the value of the domestic dollar in the exchange market, because directly or indirectly the economy will be affected by the currency levels.