Fast Forex Education

What Is Forex?

Foreign exchange is often shortened to Forex, which is currently by far the largest financial trading market worldwide with between $1 and $2 trillion dollars being traded on the market on a daily basis. This dwarfs the $25 billion that are traded on the New York Stock Exchange every trading day.

At a fundamental level Forex involves the purchasing of one currency for example UK pounds (GBP), and the selling of another currency for example US Dollars (USD). Currencies are always traded in pairs with actual transactions being done through a broker.

Your objective in buying currency in a particular currency on the Forex is to bet on the economy of that particular country. If the economy of the country is prosperous then it is inevitable that this growth will be reflected in the value of the currency. This is no different to buying shares in a particular company, where in effect you are hoping that the company will flourish and prosper so that the value of your shares will increase and you will make a tidy profit.

Unlike a stock-exchange the Forex is not located in any specific physical place. Instead it is run electronically using telecommunication links between specific centers in countries all over the world. Furthermore trading takes place on a 24hr basis, which reflects the fact that somewhere around the globe a country’s financial centers are open for business. This is ideal for the small trader as provides the opportunity for flexibility within the hours worked.

Despite the fact that the Forex has been in existence since 1979 it has only really grown in popularity since the turn of the millennium. This is primarily due to the fact that historically an investor or company would need to commit tens of millions of dollars to begin trading the Forex. This has dramatically changed and now you or I could get started for as little as $50.

As you would expect in any trading platform there are some highly popular currencies that are traded in huge volumes. The top 7 include:

• US Dollars (USD)
• Japanese Yen (JPY)
• Euros (EUR)
• Swiss Francs (CHF)
• Canadian Dollars (CAD)
• UK Pound (GBP)
• Australian Dollars (AUD)

The foreign currency symbols consist of 3 three letters, with the first two identifying the country and the final highlighting the country’s currency. The big four countries with the largest trade volumes are US dollars, Euros, Japanese Yen and UK pounds. The seven currencies taken together are collectively known as the Major Currencies.