Forex Market

Money makes the world go round. It is the ultimate commodity. Every time a company or government buys or sells a product or service in another country, a forex (foreign exchange) transaction takes place; i.e., one currency (the one used to pay for the product or service) is exchanged for another (the currency that the product or service is priced in). Forex trading is done speculatively among a huge group of individuals and organizations. It is thus not surprising that the foreign currency exchange (forex or fx) market is larger than the stock market. If all of the stock markets in the world were combined, the forex market would still be much bigger (more money changes hands every day).From 1997 to the end of 2000, daily trading volume from forex trading has surged from 5 billion to 1.5 trillion dollars. Despite this unbelievable growth, the foreign exchange market continues to grow at a phenomenal rate. No other financial market has demonstrated this stellar growth in volume.

Before the Internet came along, the only way to trade currencies was through the use of the proprietary trading systems of banks. Furthermore, this opportunity was limited to corporations and wealthy individuals who could open an account with at least one million Today, the FX market has changed completely and continued to evolve constantly. Investors with a few hundred dollars can trade currencies around the clock a day via the Internet (from Sunday to Friday), thanks to the modernization and advancement of online trading technology.Forex provides the modern day trader with a much better and simpler alternative than stocks. First of all, there are only a few major currencies to trade; the U.S. Dollar, Japanese Yen, Euro, British Pound, and Swiss Franc are the most popular. On the other hand, a stock trader has to chose from a group of tens of thousands of stocks. This increases the complexity of selecting what to trade.

Forex trading also offers much greater leverage than stocks and futures. Furthermore, the account minimums are a lot lower to trade FX. Add to this the ability a trader has to choose flexible trading hours, and it is no surprise why so many traders have left the stock and futures market to day trade currencies (Increasing leverage increases risk).