CHAPTER 1 - WHAT IS THE FOREX?
CHAPTER 1 - WHAT IS THE FOREX? FOREX = FOReign EXchange You can trade 24 hours a day The FOREX is larger than all other financial markets COMBINED The Foreign Exchange (FOREX) market is a cash (or “spot”) interbank market established in 1971 when floating exchange rates began to materialize. This market is the arena in which the currency of one country is exchanged for those of another and where settlements for international business are made. The FOREX is a group of approximately 4500 currency trading institutions, including international banks, government central banks and commercial companies. Payments for exports and imports flow through the Foreign Exchange Market, as well as payments for purchases and sales of assets. This is called the “consumer” foreign exchange market. There is also a “speculator” segment in the FOREX Companies, which have large financial exposures to overseas economies participate in the FOREX to offset the risks of international investing. Historically, the FOREX interbank market was not available for small speculators. With a previous minimum transaction size and often-stringent financial requirements, the small trader was excluded from participation in this market. But today market maker brokers are allowed to break down the large interbank units and offer small traders the opportunity to buy or sell any number of these smaller units (lots).