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Introduction to Forex

Forex is the international foreign exchange market. The name came from the portmanteau of FOReign EX change – foreign exchange operations. The Forex market is one of the youngest financial markets (Forex has been functioning since the 70's). However, it is the largest in volumes and the most fast-growing market. The daily trading turnover on Forex amounts to about 4 trillion US dollars, which by 30 times exceeds the joined volume of all stock markets in the USA.

Like any other market, Forex trades certain goods. On the foreign exchange market these goods are national currencies of different countries.

The key factor of currency rate movement is the need of state bodies as well as commercial companies to convert profits from the sale of goods and services abroad into its national currency. It accounts for 5% of the foreign exchange market turnover. The remaining 95% provides currency traders speculative capital aiming at extracting profit from currencies rate movement.

A distinctive feature of the foreign exchange market is its stability. It is a well-known fact that the main threat for any financial market is its meltdown, the fall of the stock index. However, unlike other markets (stock and commodity markets) Forex is protected by the specifics of its commodity - currency. If shares devalue, a financial collapse is inevitable. If the dollar falls, another currency will become stronger and the market movement more active. This is a good chance to generate additional profit for a trader. Unique stability of the Forex market is caused by the fact that currency is one of the most liquid and reliable trading instruments.

The speculators are generally interested in the most common (most liquid) currencies or "majors". At the moment, more than 85% of all transactions involve such basic currencies as the US dollar (USD), the Japanese yen (JPY), the euro (EUR), the British pound (GBP), the Swiss franc (CHF), the Canadian dollar (CAD), and the Australian dollar (AUD).

Forex is available wherever you are. With the help of the internet access, you can make deals with the customers who are in the other part of the world. As it was mentioned above, the exchange market always gives you an opportunity to make profit because rates' fluctuations of this or that size take place several times a day. Thus, fluctuations of the currency rates, your intellectual potential, and new technologies allow you to start a highly profitable business right now. That is why ECN broker’s services have become more relevant enabling participants to trade against each other by offering their best bid and ask prices.

Another obvious advantage of Forex is a simple way of entering the market. Finding a reliable broker is not difficult since there is a great many of them on the market. The rest depends on the person who decides to join Forex.