What is Forex?
Forex stands for the foreign exchange market. This is also referred to as the FX, Spot FX or Currency market. All of these names are just several ways of describing the very same market.
This market has been around since the 1970’s when currencies started to fluctuate when President Nixon took the U.S. off of the gold standard. Formerly, the U.S. currency was backed by gold and now it’s just backed by the “faith” in the government’s ability to honor and back the currency.
However, even though this market has been around for such a long time, it hasn’t been open to the retail public until the 1990’s and many market makers didn’t even get well established until 2000 or after.
Formerly, only the “big boys” could play around in this market. They usually had a minimum of $10 million to $50 million to throw around in this market. It was reserved basically for banks and big institutions.
Forex stands for the foreign exchange market. This is also referred to as the FX, Spot FX or Currency market. All of these names are just several ways of describing the very same market.
This market has been around since the 1970’s when currencies started to fluctuate when President Nixon took the U.S. off of the gold standard. Formerly, the U.S. currency was backed by gold and now it’s just backed by the “faith” in the government’s ability to honor and back the currency.
However, even though this market has been around for such a long time, it hasn’t been open to the retail public until the 1990’s and many market makers didn’t even get well established until 2000 or after.
Formerly, only the “big boys” could play around in this market. They usually had a minimum of $10 million to $50 million to throw around in this market. It was reserved basically for banks and big institutions.
FOREX - the foreign exchange market or currency market or Forex is the market where one currency is traded for another. It is one of the largest markets in the world.
Some of the participants in this market are simply seeking to exchange a foreign currency for their own, like multinational corporations which must pay wages and other expenses in different nations than they sell products in. However, a large part of the market is made up of currency traders, who speculate on movements in exchange rates, much like others would speculate on movements of stock prices. Currency traders try to take advantage of even small fluctuations in exchange rates.
In the foreign exchange market there is little or no 'inside information'. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time.
Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar.
Unlike stocks and futures exchange, foreign exchange is indeed an interbank, over-the-counter (OTC) market which means there is no single universal exchange for specific currency pair. The foreign exchange market operates 24 hours per day throughout the week between individuals with forex brokers, brokers with banks, and banks with banks. If the European session is ended the Asian session or US session will start, so all world currencies can be continually in trade. Traders can react to news when it breaks, rather than waiting for the market to open, as is the case with most other markets.
However, with the advent of the internet, later on it was able to be opened up to the retail public as they were allowed to trade in smaller sizes that would be feasible for the “average Joe” to be able to handle.
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