Forex Basics
What is Forex?
Forex refers to the “foreign exchange” marketplace in which the world’s 194 currencies are traded. It is also called the “currency” or “FX” market.
Any currency from the Abasi (Afghanistan) to the Zloty (Poland) backed by an existing country can be traded in the Forex market. The US dollar remains the most traded currency in the world, though the Euro is making a strong showing in second place.
High Liquidity
The Forex market is the largest and most liquid financial market in the world. More than $3 trillion are traded in Forex every day. This makes the Forex market larger than the stock and commodities markets put together. The high level of liquidity in the Forex market facilitates the constant buying and selling of currencies throughout the trading day.
Electronic Trading
The Forex market is unique in other ways. First, there is no central location where currencies are traded. Commodities can be traded on the Chicago Board of Trade. Equities can be traded on the New York Stock Exchange. However, the Forex market does not have this type of trading center. It is traded electronically. Although there is no central trading location, the largest and most active dealing center is London, where more than 30 percent of global Forex transactions are handled. New York handles 19 percent of market volume, making it the second largest center.
A Round-the-Clock Market
Forex is also unique in that it is traded 24 hours a day, except on weekends. This “round the clock” market makes trading continuous and accessible on a global scale. The Forex market is also noted for its high level of liquidity, which allows a currency to be traded at any time.
Minimal Regulation
Despite its large volume and liquidity, the Forex market remains largely unregulated. The Commodity Futures Trading Commission is charged with overseeing the Forex market. However,
Forex scams (also called “Forex frauds”) are quite common and remain primarily unpunished.
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