Forex Trading Introduction

A lot of people who are not in the financial world consider the stock exchange especially the NYSE or NASDAQ to be the big markets of the world, however the Forex, FX, Currency, or Foreign Exchange Market really does over shadow them.

The Forex market has a daily trading value of around 1.5 trillion dollars, yes daily. Putting it in perspective it is about 100 times larger in volume than the New York Stock Exchange staggering I know.

Interbank is a term used to describe the market where trades are conducted OTC (over the counter) meaning there is no central exchange. The market is world wide and trades take place between the parties involved in the trade. Thereby, no central exchange. There are main centers however and they are located in Sydney, Tokyo, Frankfurt, London, and New York. The market operates virtually 24 hours a day.

Forex trading is based on trading one countries currency against another countries currency. When you buy one currency you are simultaneously selling the other one in a specific pair or cross. For example if you buy the EUR in the EUR/USD pair you would at the same time be selling the USD. The ratio of the value of one currency to the other rises and falls, this ratio is what fuels the FX market. EUR being the Euro Dollar, and USD being the US Dollar.

The spot market is the most important in Forex trading spot meaning "cash" or trades executed at once, or "on the spot". You can trade Currency Futures, Forward Outrights, ETF's, and options some of these are more complex than the spot market.