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Forex vs. Futures
History of The Forex Market
The Foreign Exchange market, also referred to as the "Forex"
or "FX" market is the largest financial market
in the world, with a daily average turnover of well over
US$1 trillion -- 30 times larger than the combined volume
of all U.S. equity markets.
"Foreign Exchange" is the simultaneous buying
of one currency and selling of another. Currencies are
traded in pairs, for example Euro/US Dollar (EUR/USD)
or US Dollar/Japanese Yen (USD/JPY).
There are two reasons to buy and sell currencies. About
5% of daily turnover is from companies and governments
that buy or sell products and services in a foreign country
or must convert profits made in foreign currencies into
their domestic currency. The other 95% is trading for
profit, or speculation.
For speculators, the best trading opportunities are with
the most commonly traded (and therefore most liquid) currencies,
called "the Majors." Today, more than 85% of
all daily transactions involve trading of the Majors,
which include the US Dollar, Japanese Yen, Euro, British
Pound, Swiss Franc, Canadian Dollar and Australian Dollar.
A true 24-hour market, Forex trading begins each day in
Sydney, and moves around the globe as the business day
begins in each financial center, first to Tokyo, London,
and New York. Unlike any other financial market, investors
can respond to currency fluctuations caused by economic,
social and political events at the time they occur - day
or night.
The FX market is considered an Over The Counter (OTC)
or 'interbank' market, due to the fact that transactions
are conducted between two counterparts over the telephone
or via an electronic network. Trading is not centralized
on an exchange, as with the stock and futures markets.
More information
For more background about the Foreign Exchange market,
review the Federal Reserve Banks' "All About the
Foreign Exchange Markets in the United States" |
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| Unfamiliar with forex trading? Visit InterBank
Group's Learning Center
for a wealth of information about the forex market. |
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Basics
Great if you're new to the foreign exchange
market. |
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Pro
A look at sophisticated forex trading strategies and
methods. |
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