Understanding Forex Market

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The forex market is the market in which participants are able to buy, sell, exchange and speculate on currencies. Like market in real world, the forex market consist of many participants. The forex market s made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors.

The forex market is the largest, most liquid market in the world. Its average daily trading volume exceeding $5.3 trillion (in Apil 2013). Compared to US stock market, it is a huge number. The U.S. stock market trades around $226 billion a day; quite a large sum, but only a fraction of what forex trades.

Forex market and stock market comparison

Forex is traded 24 hours a day, 5 days a week across by banks, institutions and individual traders worldwide. Unlike other financial markets, there is no centralized marketplace for forex. Instead, these transactions are conducted by several market participants in several locations. Currencies trade over the counter in whatever market is open at that time. Once you enter forex market, you gain exposure to international markets.