Forex is short for foreign exchange. The Forex is the largest financial trading market in the world. Between $ 1 and $ 2 trillion dollars are traded on the Forex every day, compared with about $ 25 billion dollars traded daily on the New York Stock Exchange.
Forex involves the buying of one currency eg UK Pounds (GBP), and selling another currency eg US Dollars (USD). (Currencies are always quoted and traded in pairs.) The actual buying and selling is done through a dealer or broker.
When you buy shares in a particular company, you are in effect investing your money in that company. You hope the company will be successful and prosper, so the value of your shares will increase. In just the same way, when you buy the currency of a particular country on the Forex, you are investing your money in the economy of that country. If the economy of the target country is healthy, then the value of your currency will increase, and you will make a profit.
The Forex is not located in any one physical location. The entire foreign exchange market operates on a 24 hour time scale. Itis run electronically through communications links between centers in different countries.
The Forex market has been in existence since 1971, but until the start of the 21st. Century, only individuals and companies with tens of millions of dollars could afford to trade the Forex. All that has changed now however. All you need to get started is a computer with a fast (DSL) internet connection. Plus you can get started with an investment of as little as $ 50.
The seven most popular currencies in the US Dollar (USD), Euros (JPY), UK Pounds (GBP), Swiss Francs (CHF), Canadian Dollars (CAD) and Australian Dollars (AUD) . Foreign currency symbols consist of three letters. The first two letters identify the country, while the last letter identifies the currency of that country's currency.
For example: –
USD: US = United States, D = Dollars.
GBP: GB = United Kingdom (Great Britain), P = Pounds.
The reason the Forex market is open 24 hours, is because at any time during the 24 hours, a financial center is open for business somewhere in the world. And because the foreign exchange market is open around the clock, you can trade the Forex any time that suits you best.
The four currencies with the highest trade volume (in order) are US Dollars (USD), Euros (EUR), Japanese Yen (JPY) and UK Pounds (GBP). These four currencies together with Swiss Francs (CHF), Canadian Dollars (CAD) and Australian Dollars (AUD) are called Major Currencies.