The word Forex or FX stands for Foreign Exchange, and it is the simultaneous buying of one currency and selling of another. It is the largest financial market in the world. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or Great British Pound/Japanese Yen (GBP/JPY). The Forex Market handles a huge volume of transactions 24 hours a day, 5 days a week.Forex was established in 1971 and grew steadily throughout the 1970’s, but with the technological advances of the 80’s the Forex market expanded from trading levels of $70 billion a day to the current level of about $3.00 trillion. In comparison, the United States Treasury Bond market makes an average of $300 billion a day, and the combined American stock markets exchange makes about $28 billion a day, so you can see how enormous the Forex market really is. It actually equates to more than three times the total amount of the stock and futures markets combined.
What drives the Forex market?
Different countries use different currencies; however cross-border transactions take place. If the whole world used one currency only there would be no need for the Forex market to exist. The need for the Forex market comes from the need of exchange between countries, which in return reflects to the need for currency exchange. The price of the currencies are determined by the supply and demand, so unlike other markets that are subject for price manipulation it is simply too big for one entity to control.
What is traded on the Foreign Exchange?
The simple answer is money. Currencies are traded through a broker and are always traded in pairs; for example the US Dollar against Euro, or the English Pound against the Japanese Yen.Other aspects of Foreign Exchange are Futures, CFD Stocks, Metals and Energy.
No comments:
Post a Comment