What is forex?
The foreign exchange market also referred to as 'forex' or 'fx' is the largest financial market in the world, with a daily turnover of well over 1 trillion dollars -- 30 times larger then the combine volume of all U.S. equity market. Unlike other financial market the forex market has no physical location or central exchange. It is an over the counter market where buyers and sellers including banks, corporations and private invstors conduct business. A true 24 hour market, forex begins each day in sydney and moves all round the globe as the business day begins in each financial center, first to Tokyo, London and New York.
Traditionally the foex market was only available to larger entities trading currency for commercial and investment purposes through banks now so many trading platforms such as RF2000TM allow smaller financial institutions and retail investors access to a similar level of liquidity as the major foreign exchange banks, by offering a gateway to primary (Interbank) market.
In the forex market currencies are always priced in pairs, therefore all trades result in simultaneous buying of one currency and selling of the other. The objectives of currency trading is to exchange one currency for another inthe expectation that the market rate or price will change so that the currency you bought has increased in its value relative to the one you sold. If you have bought a curency and the price appreciates in its value, the trader must sell the currency in order to lock in the profit. An open trade or position is one in which a trader has either bought or sold one curreny pair and has not bought or sold back the equivalent amount to effectively close the position.
The first currency is in the pair is referred to as the base currency while the other as the counter or qoute currrency. As with other financial products, FX quotes includes 'bid' and 'ask'. The bid price is the price in which a market marker is willing to buy (and clients can sell) the base currency in excahnge for counter curreny. While the ask price is the price the marker is willing to sell (and clients can buy) the base currency in exchange for counter currency. The difference between the 'bid' and 'ask' price is referred to as the 'spread'.
