FOREX

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What is Forex (FX)?

Forex (FX) is the marketplace where various national currencies are traded. The forex market is the largest, most liquid market in the world, with trillions of dollars changing hands every day. There is no centralized location, rather the forex market is an electronic network of banks, brokers, institutions, and individual traders (mostly trading through brokers or banks).

Many entities, from financial institutions to individual investors, have currency needs, and may also speculate on the direction of a particular pair of currencies movement. They post their orders to buy and sell currencies on the network so they can interact with other currency orders from other parties.

The forex market is open 24 hours a day, five days a week, except for holidays. Currencies may still trade on a holiday if at least the country/global market is open for business.

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KEY TAKEAWAYS



  • The forex market is a network of institutions, allowing for trading 24 hours a day, five days per week, with the exception of when all markets are closed because of a holiday.

  • Retail traders can open a forex account and then buy and sell currencies. A profit or loss results from the difference in price the currency pair was bought and sold at.

  • Forwards and futures are another way to participate in the forex market. Forwards are customizable with the currencies exchanged after expiry. Futures are not customizable and are more readily used by speculators, but the positions are often closed before expiry (to avoid settlement).

  • The forex market is the largest financial market in the world.

  • Retail traders typically don't want to have to deliver the full amount of currency they are trading. Instead, they want to profit on price differences in currencies over time. Because of this, brokers rollover positions each day.