Forex which stands for foreign exchange or FX is one of the most actively traded markets in the international arena. Almost 85% of the trade deals with the biggest and the most liquid currencies. The US Dollar, English Pound, Swiss Franc, Canadian Dollar and the Australian Dollar are some of the commonly traded currencies. The forex market operates 24 hours every day except on weekends. It kicks off on Sunday at 20:15 GMT and closes on Friday at 22:00.

The Birth of the Forex Market

Following the World War II, international trade and subsequent foreign exchange transactions took place using a fixed exchange regime fostered by the Bretton Woods system. The forex market was founded in 1971 when these fixed exchange rates were replaced for floating ones in global trade. With more and more countries easing their currency restrictions and focusing on global trade, the forex market now sees a daily turnover of US$ 3.2 trillion making it the most traded market in the world.

What exactly constitutes the forex Trade

Forex trade is carried out in currency pairs, i.e. when a particular currency for example the Euro is purchased against the Japanese Yen. Here the former is exchanged in place of the latter which is sold. The order for trade can be placed through a broker or a market marker who will then pass it on to someone in the Interbank Market to actually execute it. As you finish your day’s trade, your broker proceeds to furnish your account with the day’s gains or losses.

What fuels the Forex Market

The prime intention of such market is to support international trade. With the support of floating exchange rates, a businessman in Europe will be able to pay Japanese Yen for Japanese goods imported into his country even though his income happens to be in Euros. The market also operates to support speculation for profit in the value of currencies. Speculation on alterations in interest rates of currency pairs is also encouraged here. Effortless Accessibility

State of the art e-commerce technology has brought the forex market much closer to the general public when previously access was allowed only for the big and multinational banks. Most transactions are carried out online with e brokers accounting for 11% of the total forex turnover. The major banks partaking in such trade would be Barclays, Citibank, Union Bank of Switzerland, Deutsche Bank, Chase Bank of Manhattan etc.

Stability in Forex

A unique feature of the forex market is that the market never fails. A simple explanation is that every time a currency falls, another one gains in effect. Conversely, in the share market, slump in major shares denotes a weak trading period and is reflected on the exchange indices as a declining trend. The strength of the currency is absolute and being entirely liquid can be traded anytime. A trader or investor has to stay attuned to the shifts in currency trends and make immediate adjustments to his holdings for making substantial gains. He can also make use of automated trading systems to monitor proceedings in multiple markets and take advantage of favorable currency rates.