In short, FOREX is simply a combination of the English words 'FOReign' and 'EXchange'.
The meaning of FOREX is therefore the global currency market, which is the largest, most liquid, and fastest moving financial market in the world, with a daily trading volume in excess of 3 trillion US Dollars. Unlike the Stock and Commodity markets, the FOREX market is typically open 24 hours a day, 5-days a week (from 20:00gmt Sunday evening, until 20:00gmt Friday evening).
The currency market is divided into two main market fields: 'Spot' and 'Forward'.
A 'Spot' transaction is typically a 2-day delivery transaction (settlement after 2 days). This type of trade represents a direct exchange of two currencies, has the shortest time frame, and involves cash rather than a contract. Spot transactions have the largest share by volume among all FOREX instruments.
A 'Forward' transaction has a longer duration, with the funds not changing hands until an agreed upon future date, regardless of what the actual rates are then. The duration of the trade can be a few days, months, or even years. The difference in the yield of the two currencies involved is calculated and either added, or subtracted, to the account -and is commonly referred to as a 'Swap'.
The main counterparties in the FOREX market are large banks, but there are also currency speculators, multinational corporations and other institutions. These market participants show their interest to buy or sell one currency against another at a specified price and in a specified amount. Many of these banks or institutions are happy to quote prices both as buyers and as sellers, at specific levels. These are called 'Market Makers', and as such they are called upon at any time to quote a price to other market participants.
To help bring all these different counterparties to together, and to keep the wheels of the FOREX market greased, are retail and interbank FOREX 'Brokers', whose job it is to act as an intermediary by quoting the prices to the market, so that a trade can be agreed between two market participants.
As well as the 'natural' business of exporters and importers, and the 'hedging' by corporate institutions (whose objective is to minimise the currency risk of their daily business), there are legions of traders and investors who speculate on price changes in the market. And, on top of this, arguably the most powerful participants of all, the world's Central Banks, who have the ability to alter the direction of the market by raising or lowering their country's interest rates.
To sum up, the advantages of the global FOREX market over the world Stock (Share) and Commodity markets, is the high degree of liquidity (particularly in the most widely-traded traded currencies like the Euro, the US Dollar and the Japanese Yen), the absence of insider trading, and because of the enormous volume and liquidity compared to other markets, the higher precision in price forecasting through the use of 'Technical Analysis'.
what is forex, brief introduction to the forex marketplace. by fxtrader.ch a swiss based independent forex (fx) trader with strategies developped by Franco Camarca of lugano /switzerland using japanese candle stick charts/patterns, moving averages and personally developped indicators. fxtrader, forex, forex trading, eurusd, usdchf,eurchf,euraud,eurjpy,usdjpy,...we also keep always an eye on financial markets looking for any profit possibility.Franco Camarca, swiss global investment advisor and independent forex (fx) trader
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