What Is Forex?

The term 'Forex' is short-hand for 'foreign exchange.' Therefore, the Forex Market = The Foreign Exchange Market.

What is being exchanged on this market is not stocks or bonds, but currencies (monies) from around the world.

In other words, the Forex market is the place where U.S. dollars, Euros, Yen and other major currencies are bought and sold. It represents not only the largest financial market in the world by volume, but also the most'liquid' of all markets in the world. The daily 'turnover' of trade volume, speaking in U.S. dollar terms, is on the order of trillions.

There are a lot factors unique to the Forex market which make it a very exciting, fast-paced alternative to traditional investing:

	The market runs 24 hours a day from late Sunday to late Friday.
	The market is affected by world events and news more so than others
	There are no commissions to be paid out on your trades
	Extremely high-liquidity
	100:1 Leverage (move $100,000 in currency using only $1,000 of your own money!)

The important thing to understand right now is that Forex trading among private investors is still relatively new. The market once operated almost exclusively between government (central) banks and commercial banks until advances in communication, such as the Internet and PC banking, allowed speculators easier access to the market.

The Forex Market today represents the largest and most 'liquid' of all markets in the world. The daily 'turnover' of trade volume, speaking in U.S. dollar terms, is on the order of trillions.

The major players involved in these trades are Banks, Governments, Speculators, Corporations and Other, related financial markets and institutions (e.g., brokers).

Now, one of the first things you must understand is that these institutions are NOT all on a level playing field with one another.

In other words, not all Forex traders have equal access to the same prices. The bid price and asking price (also known as the “spread”) between currencies is in part determined by the size and volume of the trade.

The more money a trading entity can put on the line, the better the 'spread'.

As you might surmise, the central and world banking institutions (the 'inter-bank' market) are at the top of the tier. They are followed next by governments and large financial institutions or corporations.

 The History Of Forex

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