What Is Forex And How Does It Work

What is forex

Forex is simply a global market that allows the exchange of one currency for another. This makes it the largest financial market in the world.

How does Forex work? So let’s say you went on a trip to Japan, on reaching there, you had to find a currency exchange booth at the airport, and then you exchange your country’s currency to that of Japan. You go up to the counter and notice a screen displaying different exchange rates for different currencies, when you participate in that exchange process, you’ve essentially participated in the forex market, you’ve exchanged one currency for another. But when returning home, you stop by the currency exchange booth again to exchange back the yen that is left. And then you notice the exchange rates have changed. It’s these changes in the exchange rates that allow you to make money in the foreign exchange market. As I said in the beginning, Forex is the largest financial market in the world. The foreign exchange market looks absolutely enormous with its $5 TRILLION a day trade volume. Compared to the “small” $22.4 billion per day volume of the New York Stock Exchange (NYSE).

New Article: Begineers approach on forex

That huge $5 trillion number covers the entire global foreign exchange market, BUT daily trading volume from retail traders (that’s us) make up between 5-6% of overall volume, or between $300-400 billion. So you can see Forex is huge, but not as huge as they say it. The market also rarely closes, the forex market is open 24 hours a day and 5 days a week, only closing down during the weekend. So unlike the stock or bond markets, the forex market does not close at the end of each business day. Instead, trading just shifts to different financial centers around the world.     Subscribe to our blog, and share to get part 2 of this article on Forex trade.

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