The forex exchange, also referred to as
the "Forex" or "Spot FX" market, is the largest financial market in the world, with over $1.2 trillion changing handsevery single
day.
If you compare that to the $25 billion a day volume that the New York
stock exchangetrades, you see how giant the forex exchange really is. In fact it is three times larger than all of the US
Equity and Treasury markets combined!
What is traded on the forex exchange? The answer is money.
Forex trading is where the currency of one nation is traded for that of
another.
Therefore, forex trading is always traded in pairs. The most commonly traded currency pairs
are traded against the US Dollar (USD). They are called ‘the Majors'.
The major currency pairs are the Euro Dollar (EUR/USD); the British
Pound(GBP/USD); the Japanese Yen (USD/JPY); and the Swiss Franc (USD/CHF).The notable ‘commodity’ currency pairs that trade are the Canadian
Dollar(USD/CAD) and the Australian Dollar AUD/USD.
Because there is not a central
exchange for the forex market, these pairs and their crosses are traded over the
telephone and online through a global network of banks, multi national corporations, importers and exporters, brokers and currency
traders.
Traditionally, currency trading has been a 'professionals only' market available exclusively
to banks and large institutions, however, because of the rise of the new E-economy, online forex trading firms are now able to offer trading accounts to 'retail' traders
like you and I.
Now almost anyone with a computer and an Internet connection can trade
currencies just like the world's largest banks do. There are now over 6 million trading accounts worldwide up from 4 million in
2005.
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