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What is Forex?

August 6, 2007

What You Should Know About Forex

Foreign Exchange (FOREX) is an arena where a nation's currency is exchanged for that of another. The foreign exchange market concurrently is the largest financial market in the world, with over $1.5 trillion dollars changing hands daily. Unlike other financial markets, the Forex market has no physical location and no central exchange. It operates through an electronic network of banks, corporations, institutional investors and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another across the major financial center of the globe.

Benefits of Trading Forex
  • Leverage - FOREX investors are permitted to trade foreign currencies on a highly leveraged basis - up to 100 times their investment. For example, an investment of US $1,000 would permit a trade up to US $100,000 of any particular currency.

  • Liquidity - a powerful attraction to any investor as it suggests the freedom to open or close a position at will anytime during the 24-hour trading sessions.

  • Utilizing only a small portion of initial investment (anywhere from 10-30% of total investment) for margin deposit, no predetermined cost is assessed.

  • Currencies are traded in pairs, for example USD/JPY or USD/CHF. Every position involves the selling of one currency and the buying of another. Added to the fact that gains can be made when the market is to the upside as well to the downside.

  • "Past performance is not indicative of future results. Forex Trading involves substantial risk of loss and it is not suitable for all investors. Levaraged trading magnifies profits and losses"


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