Forex.com Tutorial

What is Forex

The foreign exchange market, or Forex for short, is a worldwide network of currency trading. Much like the stock markets trade stocks, the Forex market provides for the trading of world currencies. Traders all over the world take part by buying and selling currencies at all times of the day, attempting to benefit from the ever-changing exchange rates. For the most part, Forex is a speculators market. Approximately 90% of all daily transactions are speculative in nature, while hedgers and foreign trade account for the remainder.

Because the Forex market’s foundation is the exchange rate between global currencies, its traders are found all over the world. The uniqueness of this market’s global reach provides for characteristics not seen in other markets. First, the Forex market is open 24 hours a day, from Sunday 10 PM GMT to Friday 10 PM GMT; it is even open on most holidays. The availability of an “always open” market is a big factor in drawing in traders, who can essentially trade whenever time permits. This is much different than other markets, where strict hours dictate when trading can occur.

The Forex trading week begins on Sunday at approximately 10PM GMT, about the same time that a normal business week is getting underway in New Zealand, Australia, and Japan. The market then stays open all week, 24 hours a day, until Friday afternoon at 10PM GMT, when New York traders exit their offices for the weekend. In this six-day period we witness a never-ending cycle of market sessions following the sun around the world from Sydney to Tokyo to Dubai to Moscow to London and finally New York.

With such a global reach, the Forex market attracts a lot of attention and traders around the world. Due to the number of active traders, the Forex market is the most traded market in the world. It is not uncommon to see worldwide daily Forex volume exceed $3 trillion. This high volume provides specific benefits. First, it allows the market to absorb large institutional transactions without being highly affected, which creates a more level playing field and also provides the benefit of increased liquidity.

Liquidity refers to how easily an asset can be converted to cash, or—in the Forex trading world—how easily a currency can be bought and sold. Because so many people trade Forex worldwide,

the Forex market is usually considered to be highly liquid. In other words, it’s fairly easy to enter and exit positions whenever you’d like at the prices you’re quoted (For most currency pairs).

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