what is forex ?
Are you a forex newbie? Well here is where you begin your illustrious forex trading career.
Our Quickstart guide is a series of Forex lessons created to quickly familiarize the clueless forex newbie or kinda-clueless forex newbie.
Every industry has its own collection of jargon, and Forex is no exception. You have to grasp Forex gobbledygook before you can start trading. The lessons are designed to help you gain a better understanding of what the Forex market actually is, who participates in this foxy market, and how you can make money trading Forex.
By the time you finish reading this guide, the slang of currency trading will have become second nature to you.
What is FOREX ?
The Foreign Exchange, also referred to as the "FOREX" or "Forex" or “FX” or "Spot FX" market is the largest financial market in the world, with a volume over $1.95 trillion a day. If you compare that to the $25 billion a day volume that the New York Stock Exchange trades, you see how giant the Foreign Exchange really is. It's actually more than three times the total amount of the stocks and futures markets combined!
What is traded on the Foreign Exchange ?
The answer is money. Forex trading is the simultaneous buying of one currency and selling of another. Currencies are traded through a broker or dealer and are traded in pairs; for example the Euro dollar and the US dollar (EUR/USD) or the British pound and the Japanese Yen (GBP/JPY).
This kind of trading is often very confusing to people because they are not buying anything physical. Think of buying a currency as buying a share in a particular country. When you buy, say, Japanese Yen, you are in effect buying a share in the Japanese economy, as the price of the currency is a direct reflection of what the market thinks about the current and future health of the country's economy.
In general, the exchange rate of a currency versus other currencies is a reflection of the condition of that country's economy compared to the other countries' economies.
Unlike other financial markets like the New York Stock Exchange, the Forex spot market has neither a physical location nor a central exchange. The Forex market is considered an Over-the-Counter (OTC) or 'Interbank' market, due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period.
Which Currencies Are Traded?
Any currency backed by an existing nation can be traded at the larger brokers. The most popular currencies along with their symbols are show below:
Symbol Country Currency
USD United States Dollar
EUR Euro members Euro
JPY Japan Yen
GBP Great Britain Pound
CHF Switzerland Franc
CAD Canada Dollar
AUD Australia Dollar
Forex currency symbols are always three letters, where the first two letters identify the name of the country and the third letter identifies the name of that country’s currency.
The Forex market (OTC)
The Forex OTC market is by far the biggest and most popular financial market in the world, traded globally by a large number of individuals and organizations. In the OTC market, participants determine who they want to trade with depending on trading conditions, attractiveness of prices and reputation of the trading counterparty.
In comparison, while the total daily trading volume worldwide was estimated at about US$1.5 trillion, only about 12 billion dollars was estimated for currency futures - less than a tenth of one percent!
