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The foreign currency exchange market is the
largest financial market in the world, also known as "forex"
or "fx" market.
The forex market is larger than all the
stock
markets combined.
The forex market has a daily trading
volume that is larger than that of all the world's stock
markets put together.
In the past
only corporations and wealthy people traded currencies in
the forex market.
They used proprietary trading systems of
banks. However, opening an account required about one
million US dollars.
Thanks to the internet, investors with
only a few thousand dollars can access the foreign exchange
market 24 hours a day.
Forex
trading provides an alternative to stock market trading for
professional traders.
There are only a few significant
currencies available to trade. However, there are literally
thousands of different stocks for the trader to choose.
Here
are the major currencies available for trade: the Yen,
Dollar, Swiss Franc, Euro and the British Pound.Forex
trading gives you the ability to have flexible trading hours
because it goes on for 24 hours a day. The main forex
trading centers are in New York, London,
Singapore and Tokyo; however, banks all over the
world participate in trading.
Due to the location of the major trading
centers, Traders can react to news immediately
when it breaks. For example,
when the Asian trading session ends, the
European session is just beginning, followed by
the session then back to the Asian session. A
fluctuation in the exchange rate is usually caused by actual
monetary flows. Also, the expectations of changes in
monetary flows caused by changes in GDP growth, inflation,
interest rates, budget and trade deficits or surpluses,
large cross-border Mergers & Acquisition deals and other
macroeconomic conditions. In the forex
market there is generally little or no 'inside
information'. Major news is released to the
public, often on scheduled dates. Many people
have access to the same news at the same time.
The large banks have a very important advantage;
they can see their customers' order flow. Many factors
affect exchange rates. Currency prices are a result of
supply and demand.
The world's currency markets are a huge
melting pot. Due to the large and ever-changing mix of
current events, supply and demand factors are constantly
changing, and the price of one currency in relation to
another shifts accordingly.
No other market takes in and
refines as much of what is going on in the world at any
given time as the forex market.
by Tom Houser
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