• The FX or Forex Market is simply an acronym or shortened version of Foreign Exchange Market.
• The foreign exchange market that we are involved with is also known as the “spot cash” or “inter-bank” market. This market revolves around a worldwide electronic network, that connects banks, brokers, and other financial intermediaries. There is no physical location to the market as compared to say, the New York, Toronto, London or Tokyo stock exchanges.
• Transactions happen in seconds as they can be done directly with the market makers on fully executable prices.
• All profits are then settled immediately in cash.
Today’s Forex Market
• Just a few short years ago, the Forex market was like a private club reserved for the world’s major banks, corporations involved in international trade, and high net worth individuals with millions of dollars in their trading accounts.
• Since 1997, the rules have changed, primarily due to technology and competition. The pervasive power and reach of the internet and competitive market forces have converged to create one of the most significant opportunities of our lifetime for investors everywhere. No matter where you are, you now have access to cost-effective, live, streaming data displaying real-time currency prices.
• You don’t have to be a professional trader anymore to profit from timely economic news and announcements as well as sophisticated technical analysis. We are witnessing the true democratization of the most powerful financial market on earth, a market no longer restricted to typical institutional traders. It is now open for business to the average investor who wants to reap the lucrative rewards that are generated by successful currency traders.
Who’s Trading Forex ?
• Each and every day, countless transactions occur in the international marketplace based on the purchase and sale of goods and services. In addition, there is a continuous movement of big money by major institutional players that are constantly trying to capitalize on fundamental economic conditions and events.
Citi Group Annual Report
• If you could look at the annual report from the world’s largest financial institution it would reveal some of the massive revenues that are being generated through foreign exchange activities.
• Although banks may only pay their depositors a few percent on the money in their savings accounts, they are continuously profiting by investing this money in the market. Imagine the profit potential if you could earn 10 or 20% or more each month on your money instead of the 2 or 3% per year that the banks pay you.
Who’s Trading Forex ?
• Does it surprise you to know that in August 2003, the Wall Street Journal reported that “Daimler Chrysler” made more money in second quarter operating profits through foreign exchange than they did by selling cars and trucks?
Forex Market Growth
• As the financial backbone of the global economy, the Forex Market is growing at an unprecedented rate. According to a September, 2004 article in the Financial Times of London, one of the most respected economic news sources in the world, the Forex market has now reached the transaction level of a staggering 1.9 trillion dollars a day! This is far and away the largest financial market in the world and infinitely larger than any other market in existence.
• A quick look at this financial market comparison will give you an understanding of the sheer magnitude of the Forex market. As you can see it absolutely towers above all of the other markets, even on a combined basis.
• When it comes to the financial markets, size really does matter, as it creates liquidity for all traders.
Advantages of Trading Forex
• Due to the vast size of the Forex market, liquidity is virtually unlimited, thereby enabling traders to easily get in and out at the price they want.
• The market is so large that no individual or institution can control it. With real-time economic data available simultaneously everywhere in the world, all traders have access to the same information, ensuring a superior level of transparency compared to all other financial markets.
• Forex Brokers charge traders a small bid-ask spread measured in 100’s of a cent only when taking a trade. In other markets, trading expenses are applied going in and out, and can quickly eat into profits.
• Money can be made when the market moves up or down. There are no special provisions to go long on rising prices or short on falling prices. And unlike the stock equity, futures , and options markets, the FX market is not subject to recessions and bear market conditions.
• The learning curve for Forex traders is faster and simpler as there are just a handful of major currencies necessary to work with. In the global stock market, there are over 40,000 stocks competing for investors’ attention.
• Traders today can open an account with some “blue chip” currencies for as little as $300. This is a remarkable reflection of competitive market forces at work as the market expands to accommodate the average retail investor.