The Foreign Exchange Market, a.k.a. FOREX, is a worldwide market for buying and selling currencies. – basically you are trading currencies of different countries.
Currencies are always traded in pairs. For example, the US dollar against the Japanese yen, or the English pound against the euro. Every transaction involves selling one currency and buying another, so if an investor believes the euro will gain against the dollar, he will sell dollars and buy euros.
The potential for profit exists because there is always movement between currencies. Even small changes can result in substantial profits because of the large amount of money involved in each transaction.
The FOREX market handles a huge volume of transactions 24 hours a day, 5 days a week. The market opens Monday morning Australian time and closes Friday afternoon New York time. Trades can be done on the Internet from your home or office.
Daily exchanges are worth approximately $1.5 trillion (US dollars). In comparison, the United States Treasury Bond market averages $300 billion a day and American stock markets exchange about $100 billion a day.
Anyone can enter the Forex market. With a $300 mini account you can trade lots of 10,000 units. One lot of 10,000 units is equal to 1 contract. Each “pip” or move up or down is worth $1 gain or loss. With a standard account and $1000 you can control over 100,000 units of currency an each pip is worth $10.
In the Forex market you can profit in a bull or bear market.
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Because of the size of the Foreign Exchange Market, investments are extremely liquid. International banks are continuously providing bid and ask offers and the high number of transactions each day means there is always a buyer or a seller for any currency.
There is no possibility of insider trading in Forex. Currency fluctuations are usually caused by changes in national economies and news about these changes is available to everyone at the same time.
The Forex market can be a relatively safe market for the individual investor. There are safeguards built in to protect both the broker and the investor and a number of software tools exist to minimize loss.
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