Introduction to the Basics of Forex
- What is Forex?
- The History of Forex
- What is traded on the Foreign Exchange?
- How to Read a Forex Quote
- Advantages of Forex Trading
- Vital Forex Definitions
- Currency Acronyms and Abbreviations
What is Forex?
In general, Forex trading, FX trading, Spot trading or Foreign Exchange trading, is the
simultaneous exchange of one country’s currency for that of another.
In term of size, the Forex market is the world’s largest and most liquid financial market,
whose daily average trading volume exceeds $5 trillion.
Unlike other financial markets that operate at a centralized location, the worldwide Forex
market has no central marketplace.
The Forex market is just a global electronic network of
banks, financial institutions, brokers and individual Forex traders, all involved in the buying
and selling of currencies. Trading activity occurs worldwide 24 hours a day, corresponding
to the opening and closing of financial centers around the world; and so at any time, five
days a week and in any location around the globe there are Forex buyers and sellers,
making the Forex market the most active and liquid market in the world.
Traditionally, Forex was traded in large volumes by only the banking sectors for their own
commercial and investment purposes. But since 1971, when the exchange rates were
allowed to be floated freely, trading volume has increased dramatically. Today, importers
and exporters, international portfolio managers, multinational corporations, speculators,
day traders, long-term holders and hedge funds all use the Forex market to speculate,
pay for goods and services, transact in financial assets or to reduce the risk of currency
movements by hedging their exposure in other markets. However, it is important to note
it is estimated that over 90% of the Forex daily trading volume is generated as a result of