The Forex Market

Forex is the world’s largest financial market, with global turnover exceeding US $1 trillion per day and offers unmatched size and liquidity. Is forex trading an opportunity for you?Forex refers to buying and selling currency pairs. Unless you are a professional participant such as a bank, these will be in standardised sizes, similar to futures market contracts. Typically forex traders work on margin, up to 200 times.You can theoretically trade quite obscure currency pairs, but in practice, most traders stick to a small number of currency pairs, such as EUR/USD, USD/JPY, AUD/USD, NZD/USD, GBP/USD, EUR/JPY and USD/CHF. The most common currencies are the US dollar, the Japanese Yen, the European Union Euro, the Swiss Franc, the New Zealand Dollar, the Canadian Dollar and the Australian Dollar.The forex market is different from other markets (futures, stock and options) in that it doesn’t have a central point. Instead, it is an interbank market, and deals are made between market participants.This means that prices are not official, and vary based on where they are measured.Most retail level participants in this market don’t have their orders loaded into the market, but instead the forex broker actually takes the other side of the deal. Generally most retail participants risk either $1 per $0.0001 or $10 per $0.0001 (that is, they win or lose that amount for each $0.0001 movement)One characteristic of the forex market is that there are often very long term trends. However it is a news sensitive market, and reserve bank announcements such as official interest rate changes will have an immediate impact on currency prices.