Acquainting Yourself With Forex
Forex - commonly referred to as the Foreign Exchange Market, is responsible for the purchase and sale of currencies throughout the world. As such, it has established itself as the world's largest financial arena, generating in excess of a trillion dollars each day in American dollars. Since the focus is on the exchange of currencies, it's understood that each transaction involves two entities, e.g., trading U.S. dollars for Eurodollars or U.S. dollars for pesos, etc. While a large portion of these trades include U.S. dollars, those that don't are referred to as "cross currencies."
Due to the time differences around the world, Forex is in operation *round the clock*. Each day, trading begins in Sydney and spreads throughout the world as a new business day dawns in each country. From Australia to Japan, and on to England and America, Forex never sleeps, but continues its never-ending journey around the globe to bring economic stability to its inhabitants. The benefit of this scenario is that traders can operate in a real-time setting.
Since only about 5% of the daily monies are generated through purchases and sales by various governments and corporations, the bulk of the trading is for speculation and/or profit. From the perspective of speculation, the best trading comes about as a result of "The Majors" - the most actively traded currencies, such as the U.S. dollar, Euro Dollar, British Pound, Japanese Yen, Swiss Franc, Australian Dollar and the Canadian Dollar. All but approximately 15% of the transactions each day involve one or more of these currencies.
The telephone network and World Wide Web are critical tools in the ongoing operation of Forex, since trades are conducted through these two avenues. A major internet crash, for instance, could have a devastating impact on the economy, since the operations within the Forex forum could be rendered incapacitated. Unlike the Stock Market, Forex is not conducted within a physical arena, but through telephone and internet trading. As a result, this is considered to be an "over the counter" market - and an extremely affluent one, at that.
Learning and comprehending the quoting system within Forex may be a challenge to some, but it only requires a basic understanding of how things work - and in what order. For instance, when currencies are listed, the first one is considered the base currency, and that currency - whichever one it happens to be - is always considered to be "1". In this way, you'll be able to monitor the rise and fall of that currency's value as the trading progresses.
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About the Author
Jaimein Shun is an avid Forex trader and webmaster of ForexEye, a complete resource directory at your fingertips on everything from charts and options to trading platforms. To view his article archive, visit: http://www.forexeye.com/newsletters
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