The Foreign Exchange market, also referred to as the spot “FOREX” market, is the largest financial market in the world, with a daily average turnover of approximately $1.5 trillion USD. Foreign Exchange is the simultaneous buying of one currency and selling of another. Most FOREX trading consists of trades between the U.S. dollar and six major world currencies…Australian Dollar (AUD), Great British Pound (GBP), Canadian Dollar (CAD), Japanese Yen (JPY), and Swiss Franc (CHF).
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WHO ARE THE PARTICIPANTS IN THE FOREX MARKET?
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The FOREX market is called an “Interbank” market due to the fact that historically it has been dominated by banks, including central banks, commercial banks, and investment banks. However, the percentage of other market participants is rapidly growing, and now includes large multinational corporations, global money managers, registered dealers, international money brokers, futures and options…
WHERE IS THE CENTRAL LOCATION OF THE FOREX MARKET?
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FOREX trading is not centralized on an exchange, as with the stock and futures markets. The Forex market is considered an Over the Counter (OTC) or “Interbank” market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network.
WHAT IS MARGIN?
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The amount of cash deposit required in a clients account in order to open a position or to maintain an open position. Margin is essentially collateral for a position. If the market moves against a customer’s position, the client will be requested to deposit additional funds through a “margin call.”
WHAT IS A LOT?
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A standard unit of measurement for a FOREX trade. One lot in a standard account is approximately equal to $100,000 currency. Whereas, one lot in a Mini account is approximately equal to $10,000 of currency.
WHAT IS THE MARGIN REQUIREMENT TO MAKE A TRADE?
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The FOREX allows spot currency positions to be leveraged at various amounts depending on the broker – up to 50:1 leverage is common. This means that a 2% margin deposit ($200) allows you to control $10,000 of currency in a 1 Mini lot position in the FOREX market. FOREX trading is conducted on “margin” which…
HOW DOES THE FOREX MARKET DIFFER FROM THE STOCK MARKET?
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The FOREX is one of the fastest growing markets in the world because it offers the average investor leverage* unlike most any market, up to 50:1. Since the FOREX is traded globally through a network of banks and financial institutions 24-hours a day from Sunday at 5pm (Eastern Time) through Friday at 4pm (Eastern Time),…