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What
is Forex ?
Forex is an interbank market that
was created in 1971 when international trade transitioned from fixed
to floating exchange rates. Since then the rates of currencies
relative to each other are determined by the most obvious means
which is the exchange at a mutually agreed rate.
This market surpasses the others in its volume. For example, the
daily turnover of world securities market is estimated at $300
billion, while Forex approaches 1 to 3 TRILLION US dollars in the
same amount of time.
However, Forex is not a market in a traditional sense. It doesn't
have a fixed location of the trading floor as, for example, futures
market does. The trading is done over the telephone and at the
computer terminals in hundreds of banks around the world
simultaneously.
Futures and securities markets have one more significant feature
distinguishing them from Forex, and at the same time restricting
them. The trading is suspended at the end of each day and resumed
only next morning. Thus, should certain significant developments
occur in the USA, the opening of Russian market next morning could
quite surprise you, if you're trading there.
Forex is open 24 hours a day, and the currency exchange operations
are maintained throught working days of the week. Almost every time
zone (London, New York, Tokyo, Hong Kong, Sydney) has dealers
willing to quote currencies. |