NIU

forex discussion

Posted by Stacy on Wednesday, June 18, 2008 10:11 AM

I have never claimed to know much about the stock market, as a matter of fact, I don't even understand the concept of the whole thing. Well, I was at a family get together on Sunday, and having a good time visiting with everyone, when all of a sudden the conversation turned to stocks. It seemed as if my mother was asking my brother and my grandfather for advice about her stocks and for free forex tips. Needless to say I did not really understand what they were talking about, but I never forego a good education about anything, so I just sat there quietly trying to absorb what was being said back and forth. I really got lost with the whole forex discussion and when they started to talk about the foreign exchange market, I really started to just zone out. I thought about it and decided I was just as smart as anyone else in that room and I should be able to carry on a discussion on this level, so I went home and decided to get my own forex education.

Well, I found a lot of information online about forex and here are some of the answers I unearthed in my research.

What is Forex?

"Forex" stands for foreign exchange; it's also known as FX. In a forex trade, you buy one currency while simultaneously selling another - that is, you're exchanging the sold currency for the one you're buying. The foreign exchange market is an over-the-counter market.

Currencies trade in pairs, like the Euro-US Dollar (EUR/USD) or US Dollar / Japanese Yen (USD/JPY). Unlike stocks or futures, there's no centralized exchange for forex. All transactions happen via phone or electronic network.

Who trades currencies, and why?

Daily turnover in the world's currencies comes from two sources:

" Foreign trade (5%). Companies buy and sell products in foreign countries, plus convert profits from foreign sales into domestic currency.

" Speculation for profit (95%).

Most traders focus on the biggest, most liquid currency pairs. "The Majors" include US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. In fact, more than 85% of daily forex trading happens in the major currency pairs.

The world's most traded market, trading 24 hours a day

With average daily turnover of US$3.2 trillion, forex is the most traded market in the world.

A true 24-hour market from Sunday 5 PM ET to Friday 5 PM ET, forex trading begins in Sydney, and moves around the globe as the business day begins, first to Tokyo, London, and New York.

Unlike other financial markets, investors can respond immediately to currency fluctuations, whenever they occur - day or night.