What is Forex?
Forex, or FX, is a shortened term that describes the Foreign Exchange Market, a marketplace where the world’s various currencies are traded. It is an interbank market which was created in 1971 when international trade transitioned from fixed to floating exchange rates. As a result of its incredible volume and fluidity, the FX market has become the largest and most significant financial market in the world.
The Forex market is the largest market in the world with daily reported volume of over 5.3 trillion (According to the to the 2013 Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity conducted by the Bank for International Settlements-BIS), making it one of the most exciting markets for trading.
The FX 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 elec tronic network. Unlike other financial markets that operate at a centralized location (i.e., the stock exchange), the worldwide Forex market does not have a central location. It is a global electronic network of banks, financial institutions and individual Forex traders, all involved in the buying and selling of national currencies. This structure eliminates fees for exchange and clearing, thereby reducing transaction costs.
A major feature of the Forex market is that it operates continuously five and half days a week from its opening session on Sunday afternoon (Eastern Time) to Friday afternoon (Eastern Time). Throughout this period, in any location, there are buyers and sellers, making the Forex market the most liquidmarket in the world.
The spot Forex market is unique to any other market in the world, as trading is available 24 -hours a day. Somewhere around the world, a financial center is open for business, and banks and other institutions exchange currencies, every hour of the day and nigh t with generally only minor gaps on the weekend. Essentially foreign exchange markets follow the sun around the world, giving traders the flexibility of determining their trading day.
|New York Time
Although foreign exchange is the most liquid of all markets, the fact that it is an international market and trading 24-hours a day, the time of day can have a direct impact on the liquidity available for trading a particular currency. The major dealer centers and time zones are that of Sydney, Tokyo, London, and New York. Therefore, traders must consider which players are in the market, since in the modern interconnected financial world, events that occur at any hour, in any part of the globe, can affect some or all parts of the investment community. The market’s 24-hour nature is a substantial attraction to traders that prefer to trade at all times of the day, or night.
Trade forex 24-hours a day
Currency trading is available twenty-four hours a day, starting on Sunday at 5pm EST with the opening of the market in Sydney and Singapore. A short while after, the Tokyo market opens. Then London, which opens at 2am EST on Monday. And, by daytime in N.Y., the currency market has already been very active for fifteen hours. With currency trading, you are able to decide when to trade. Trading stocks when the U.S. markets are closed is difficult and only offers limited liquidity. With forex, you can trade twenty-four hours a day, from Sunday a t 5 pm EST. until Friday at5pm EST.