Introduction to the Forex Market

introducing forex marketMoney or currency is the ultimate commodity. Every time a company or government buys or sells products and services in a foreign country, they are subject to a foreign currency trade; the exchanging of one currency for another. Many individuals and organizations also trade currencies for speculative purposes. With all of these transactions going on daily, it is no wonder that the foreign exchange market, also known as "forex" or the "FX" market, has such a huge global reach and has become extremely popular among traders.

Trillions of dollars of foreign exchange Activity takes place every day. From 1997 to the end of 2000, daily Forex Trading volume surged from US$5 billion to US$1.5 trillion. According to the Bank for International Settlements (which publishes a report every 3 years), in 2010 daily trading volume in FX was estimated at 3.98 trillion USD. Thus, the forex market has demonstrated a phenomenal growth rate during this time and continues to grow as more and more participants become involved.

Before the internet came along, only corporations and wealthy individuals could trade currencies in forex through the use of the proprietary trading systems of banks. These systems required as much as US$1 million to open an account. Thanks to advancements in online technology, today investors with only a few hundred dollars can have access to the FX market 24 hours a day, 6 days a week.

For traders, currency trading provides an alternative to the trading of stocks. While there are thousands of stocks to choose from, there are only a few major currencies to trade (the Dollar, Yen, British Pound, Swiss Franc, and the Euro are the most popular). Trading in foreign exchange also provides a lot more leverage than trading in equities, and the minimum investment to get started is a lot lower. Add to that the ability to choose flexible trading hours around the clock and you have the reason why so many stock traders have flocked to trade currencies.

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