currency markets

BASICS OF CURRENCY MARKETS AND THE FOREX

Forex (Foreign Exchange) is the largest currency market in the world, with transactions exceeding $ 3.5 trillion daily. Comparing the various trading markets, the Forex market is 100 times larger than the NYSE, and is three times as large as the bond market and equities market combined. Forex is an OTC market (there is no central place of business), which means that transactions are made via telephone or via the Internet through a global, decentralized network of banks, multinational corporations, importers and exporters, brokers and sellers of swaps. This is unlike, for example, the NYSE, which has a central location where trading takes place.Basics of Currency Markets and the Forex ( Courtesy of HenryLiuForex.com )

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The Market for International Exchange (Forex or FX) is the space in which takes place the trading of currencies. In this space banks and various other institutions are facilitating the buying and selling of foreign currencies. As a rule, major currencies, such as the British Pound (GBP), the Euro (EUR), the Japanese Yen (JPY), and the Swiss Franc (CHF) are traded against the U.S. dollar (USD). The pairs trading, where the USD is not part of the pair, are called cross pairs (cross currency pairs), and occur much less frequently.

Basics of Currency Markets and the Forex ( Courtesy of HenryLiuForex.com )

Millions of dealers around the world with different training, initial capital, age or available time are trading and earning the Foreign Exchange Market (Forex), the Futures market, the CFD (Contracts for Difference) markets and other global financial markets by simply pressing a few keys on the computer and sending orders via the Internet. The turnover of the Forex market has reached record amounts exceeding 3 billion dollars, a number much higher than comparable indexes of major stock exchanges in the US.









The currency exchange pairs are expressed with the base currency (e.g. USD) being the first currency in the pair, followed by the bid currency. For example, USD/JPY would be a currency exchange pair with the American dollar as the basis, versus the Japanese yen as the bid currency.

The currency exchange pair is associated with an exchange ratio which would be expressed in the following format for a hypothetical EUR/USD currency exchange pair: EUR/USD: 1.2836 1.2839. The first number in the series represents the offer price, the cost of selling the euro against the dollar, or going 'short' versus the Euro. The second number is the bid price, the cost of buying the euro against the dollar. The difference between the ‘sell’ and ‘buy’ prices is called the negotiation spread (pip spread).










The ‘pip’ is the smallest unit of measurement for any currency. For most currencies, this is the fifth decimal digit. In dollars, each pip is equivalent to one hundredth of a penny. There is a significant difference with the Japanese yen, for which each pip is the second digit after the decimal point, making each Yen pip equal to one ‘cent’. There are several benefits and advantages to trading in Forex. Below are some of the reasons why many have chosen this currency market as a preferred business opportunity: 1. Leverage2. Liquidity3. Ability to Increase Profits and Reduce Rates4. 24 Hour availability5. Low barriers to entry ("Small Trading")6. A variety of automated trading tools7. Low transaction costs8. Market Volatility







currency markets

Economy & Finance