Currency Market: Forex
The foreign exchange market has different names by which it is known, such as Forex, Forex Retail, FX or Spot FX. The Forex market is the largest financial market in the world where transactions are made worth 4 trillion dollars a day. The New York Stock Exchange, which is the most famous stock market in the world, is worth 25 billion dollars a day, where we can see the great magnitude of the Forex market. To give you an idea of this magnitude, the market for Forex is more than 3 times larger than the total amount of stocks and the futures market combined.
In the Forex market, one currency is bought and another is sold simultaneously. These currencies are traded through an intermediary or broker, and are traded in currency pairs, for example the best known currency pair, the EUR/USD (Euro Dollar) or the USD/JPY (Dollar Yen).
Do I buy something physical on Forex?
Like almost all people who enter the world of trading, a doubt arises… In Forex, am I buying something physical, such as a stock? No, in Forex you do not buy anything physical you are buying or selling one currency pair against another. We have to think that when we buy a currency pair we are buying a share of a certain country. With an example everything is better understood, if we are buying pounds sterling, we will be buying a “share” of the British economy, this is so because the price of a currency is the reflection of what is being produced in the market and will be produced in a future.
Thus we get the concept of exchange rate. The exchange rate is nothing more than the existing change from one currency to another and this exchange rate reflects the condition of one country against another.
Where is the Forex market located?
The forex market does not have any physical location such as the New York Stock Exchange or the Spanish Stock Exchange. the forex market It is an “Over the Counter” or Interbank market, connected to a network of banks that remains open 24 hours a day.
Until the end of the 1990s, only the big companies could play investing in the foreign exchange market. The first requirement was that you must have around ten to fifty million dollars to start, therefore, Forex was initially intended to be used by bankers and large institutions and not by ordinary people like us. However, due to the rise of the Internet, online forex trading companies are now able to offer retail trading accounts where you can invest with less money. All you need to get started is a computer, a high-speed Internet connection, and Traders Business School courses.
What currencies can be traded on Forex?
ALL. In the following table we can see the most important:
As you can see, the foreign exchange market or Forex is very exciting. Follow us in future blog posts and you will continue learning everything related to the world of Trading.