The foreign exchange market, or forex for short, is a market where you can trade currencies from various countries, such as the US Dollar, the Euro Dollar, the Japanese Yen, and more. It’s the largest financial exchange in the world, and can trade upwards of trillions of dollars each day. This is well above all the volume in the U.S. markets combined.
There are many advantages to trading the forex market, including the fact that it is open 24 hours a day. To give you a visual representation of this, here’s a figure showing the hours various regions of the world are open for trading.
In this figure you can see an overlap between the London session and the New York session, between 8am and 11am EST. The currency markets experience the highest volatility and volume during that overlap, which also coincides with the releases of important US economic releases.
The forex market is also a highly liquid market, and it has a high amount of leverage that allows you to control a lot of money with a small amount of capital. Brokers usually do not charge a commission for your trades; you just pay the spread (the difference between the bid and the ask price) for the currency pair you are trading. The forex market allows you to do the same types of trading you would do in most other markets. For example, you can buy long and sell short, you can use stop losses, and you can set profit targets.
When trading currencies they are traded as “pairs”. This means that you are not trading just the US Dollar or the Euro Dollar individually. You will trade them together such as the EUR/USD, which is the Euro Dollar/US Dollar currency pair. The relationship in value between the two currencies will determine their exchange rate and whether the pair goes up in value or down in value.
Forex Trading Articles
To learn more about forex trading, check out these free articles:
- The Basics of Forex…
- How To Trade Forex On An End of Day Basis…
- How Much Do I Need In My Account To Trade Forex?