The FOREX Market, a True Giant!

Don’t Gasp, its a Trillion Dollar Speculative Market

Today, FOREX market is the largest money market in the world. It averages a daily transaction record of more than 3 trillion dollars! The FOREX market volume is 8 times greater than the combined trading volume of all stock exchanges in the world.

Almost 95% of FOREX market trading is speculative in nature. It simply means that traders buy and sell currencies for profit rather than any actual transaction for exchanging goods and services. This is the most exciting aspect of FOREX market as it’s simply offers itself as a place where buyers and sellers and speculate freely on either side (market moving up or down) and make a profit. One can earn in seconds if timing and luck is on their side, however with anything speculative comes the associated risks (please do read our risk disclosure for a better understanding of the associated risks). In successful FOREX market trading applies the very basic principles of making profit, which is you buy low and sell high. With the narrowest spreads (the difference between the buy and sell price) and the lowest costs (generally no commissions or fees) this objective becomes easiest to achieve in the Forex market. The other 5% of FOREX market trades are done for actual transactions and exchange of goods and services and international trade. Only a few decades ago this scenario was reversed, which speaks volumes for the growth and evolution of the Forex Market

The Market that Never Sleeps

FOREX market is open for trading 24 hours a day 5-days a week. The word sleep is practically alien in the FOREX market. The market is always on and you can transact anytime from anywhere in the world (as long as you have phone line and/or an internet connection). The FOREX market opens in Australia followed by Tokyo. When the Japanese market ends, the European side takes over in London and the world FOREX market trading ends in New York. However, when New York is about to close, Australia is ready to begin and the cycle goes on. This pattern can give you enough lee way and flexibility in terms of trading and market monitoring. Of course, you’re not super human to follow the market 24 hours a day. Online FOREX brokers and online currency trading firms are there to monitor the market for you. Additionally, FOREX Trading Software provided by trading currency firms can safely transact for you even when you’re sleeping.

The Major League Players (err… currencies)

The major currencies traded in FOREX market are the US dollar, the Euro, Japanese Yen, the Great Britain Pounds Sterling, Australian dollar, Canadian dollar, and the Swiss Franc. These national currencies are called the Majors because they are relatively stable and are the most traded instruments in the FOREX market trading floors. Other currencies can be traded also but the majority of transactions in the Spot Currency Trading are done using the Major currencies.
When you trade in FOREX market you will see a bid price and a sell price. The bid is the price where you can sell a currency (against another) or in other words, where a market maker has placed a bid and is willing to buy it from you. The Ask price on the other hand is where you can buy a currency (against another) and in other words, a market maker's asking price where he is willing to buy from you The difference you get between the bid and the ask price is called the spread. So, if the bid price for USD/JPY is 107.91 and the ask price is 107.95 you will have a spread of 0.04. This spread is generally what a market maker makes when dealing with their clients. When FOREX market transactions run into hundred thousands or even million dollars, this .04 spread could be enormous. This spread is miniscule compared to spreads you find in the stock market, however the minimum size for FOREX market transaction are generally a lot higher, normally 100,000 units and multiples thereof. But with advent of retail market makers, smaller market participants can also transact on these spreads at lower transaction sizes. Accounts that trade lower transactions sizes are usually known as “Mini” accounts or “Flexi” accounts, or other derivatives which imply change from the normal transaction size of 100,000 units.

Join the Big Players and Get Bigger Yourself

Today, FOREX Market players are not limited to large financial corporations, multinational banks, and national governments. Even individuals like you could enter the FOREX market and participate in worldwide currency trading phenomena. A smaller pocket size will not necessarily bar you from entering the market and playing with the big boys, as smaller FOREX market participant can enter through the “mini” accounts. Additionally, leverage plays an important role in the FOREX market which allows smaller accounts to transact on larger notional size. Leverage is a double edged sword, which not only increases your propensity to gain but also your propensity to lose. It is this leverage that increases the notional size of the market and the profit and loss that is transferred between participants. FOREX market allows the highest levels of leverage anywhere from 25:1 to all the way to 500:1 or even greater in some instances. Be careful when using leverage and only use high leverage for shorter periods of times.