The Foreign Exchange is the world’s largest financial market, with over $3 trillion
traded daily. By way of comparison, the Forex market is 100 times larger than the
New York Stock Exchange, and triple the size of the US Equity and Treasury markets
combined. Forex is an over-the-counter market (no central trading arena), meaning
that transactions are conducted via telephone or internet by a global, decentralized
network of banks, multinational corporations, importers and exporters, brokers and
currency traders. This is in contrast to, for example, the NYSE, which is a centralized
equities trading location.
Trading on the Forex Market: Basic Concepts
The foreign exchange market (forex, or FX) is where currency trading takes place.
It is where banks and other official institutions facilitate the buying and selling
of foreign currencies. Typically, the major currencies—the British pound (GBP),
the euro (EUR), the Japanese yen (JPY), and the Swiss franc (CHF)—are traded against
the US dollar (USD). Trade pairs in which the USD is not included are called Cross
Pairs, and occur much less frequently.
The currency pairs are expressed with a base currency as the first part of the pair,
followed by the quote currency. (For example, USD/JPY would be the US dollar as
the base against the Japanese yen as the quote.)
Accompanying the currency pair is the quota, or bid/ask price. This is expressed
in the following format: EUR/USD: 1.2836 1.2839. The first number in the series
represents the Bid Price, the cost of selling the euro against the dollar, or going
‘short' on the euro. The second number is the Ask Price, the cost of buying the
euro against the dollar, or going ‘long’ on the euro. The difference between the
bid/ask price is called the Pip Spread.
A pip is the smallest unit of measure for any currency. In most currencies, this
is the fourth or fifth digit after the decimal point; in dollars, each pip is equivalent
to one-hundredth of a penny. One important exception is the Japanese yen, in which
each pip is the second unit after the decimal point, meaning each pip equals one
cent.
Benefits of trading online FOREX with FXGM:
There are many benefits and advantages to trading Forex. Here are just a few reasons
why so many people are choosing this market as a business opportunity:
- Leverage
- Liquidity
- Profit Potential from Rising and Falling Prices
- 24-HRS market
- Low Entry Barriers (“Mini Trading”)
- Variety of automated trading tools
- Low Transaction Costs
- Volatility
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