Forex, or foreign exchange, can be explained as a network of buyers and sellers, who transfer currency between each other at an agreed price. It is the means by which individuals, companies and central banks convert one currency into another – if you have ever travelled abroad, then it is likely you have made a forex transaction.
While a lot of foreign exchange is done for practical purposes, the vast majority of currency conversion is undertaken with the aim of earning a profit. The amount of currency converted every day can make price movements of some currencies extremely volatile. It is this volatility that can make forex so attractive to traders: bringing about a greater chance of high profits, while also increasing the risk.
5 intresting facts about Forex Market
In the mid 1980’s a form of electronic FOREX trading existed which allowed banks to contact each other electronically and request price quotes. This system of communication was very advanced at the time, it was basically a closed network real-time chat system, it was developed by Reuters and was called Reuters Dealing.
The FOREX market trades in excess of $2 trillion dollars per day ($2,000,000,000) which is about 10-15 times the daily trading volume of the world’s stock markets combined.
The majority of trading activity happens on what is known as the Major currency’s these are the USD bloc, EUR bloc and JPY bloc. These blocs represent the three largest global economies.
The FOREX market trades 24 hours per day from Monday morning in the Asia-Pacific time zone until Business close on Friday afternoon in New York. The FOREX market doesn’t even close for holidays with the exception of New Year’s Day and even that depends what day it falls on.
The US dollar index is a futures contract listed on the New York Board Of Trade (NYBOT) and the Dublin based Financial Instruments Exchange (FINEX). The US Dollar index is usually found under the symbol @DX and represents the average value of the US Dollar against other major currencies. The dollar index is heavily weighted to the Eurozone.