FOREX : THE WHO, WHAT, WHERE AND WHEN OF FOREX

What is the forex market?

The forex market is the world’s most exciting and dynamic market. With $4 trillion traded every day, it is also the largest financial market in the world.
Forex (or FX) stands for ‘foreign exchange’ which a traveller will know as the currency that you buy when visiting another country. For example, you may sell euros and buy dollars for your trip to the USA. The online forex market is, however, 90% speculative, which means that you don’t take possession of the actual, physical currency. Rather, you open and close deals and make either a profit or loss which gets reflected in your online account.
The forex market is an over-the-counter (or OTC) market which means that trading takes place directly between two parties without dealing through an exchange. This means you can conveniently access the virtual market online anywhere in the world.

Unique features:

The forex market has several advantages over other types of trading, such as traditional stocks:

Easy access:.
you can start trading forex with a low deposit. You can fund your account with a debit or credit card and start trading within minutes.

Increased opportunities:.
Forex market conditions can change at any time in response to real-time events. While you must be aware of the risks such changing markets can pose, remember that volatile markets also offer high profit opportunities.

Liquidity:.
The high volumes traded globally lead to high liquidity. The big advantage of liquidity is that you can always find demand to sell or buy the currency pair you wish.

Increased leverage:.
Leverage is when you ‘borrow’ money so that you can use a small investment to get a greater yield. Most stock markets offer 1:2 leverage. With forex, 1:100 and higher is common. This means your opportunities for gain are greatly enhanced. Remember though that your risk increases too.

Controllable risk:.
Forex traders set a stop loss which means you set the maximum amount you are prepared to risk.

Commissions:.
Commission in forex trading can either be a fixed fee or from the spread (i.e. the difference between the buy and sell price), as well as any rolling fees if you have kept a trade open overnight.

What do you trade?
In forex trading you mainly trade currencies, which are always traded in pairs. There are four major currency pairs (called the majors) which are mostly traded against the US dollar. They are the euro/dollar (EUR /USD), the British pound/dollar (GBP/USD), the Japanese yen/dollar (JPY/USD) and the Swiss franc/ dollar (CHF/USD). Trading in the four major pairs makes up the majority of the market.
You can also trade hundreds of other currencies against each other (called cross currencies because the exchange rate is calculated via the US dollar), but remember that the majors are the most liquid. you can also trade precious metals (gold, silver), indices and commodities like oil and gas.

Who trades?

There are two parties involved in an online forex deal: you as the trader and the market maker, A market maker is a company that facilitates trading by offering an ask and bid price on a currency, literally making the market for traders to trade in.
Individual forex traders like you make up the fastest-growing segment of the global forex market. The other players include the inter- bank market which is mostly made up of the largest commercial banks and securities dealers, after which you have the smaller banks, multi-national corporations and hedge funds.

Where can I trade?

Online, anywhere, anytime, on the device of your choice. You have full control to monitor the status of your trades, modify the terms of your open deals, close deals, or withdraw profits. The ability to access your deals 24/7 is a great benefit of online trading.

When to trade:

Because forex is a truly global market, you can trade 24 hours a day, five days a week. As one region’s market day ends, the next region’s market day begins. This means you can trade on any region’s news as developments take place.

Additional details.
The forex market is open 24 hours a day from the Monday morning open in Sydney to the close on Friday evening in New York. Each trading day can be broken down into three sessions: the Asian, the European EU and the US. Generally these are referred to as the Tokyo, London and New York sessions. The Asian session opens around 21:00 GMT (summer hours) and closes around 08:00 GMT. This overlaps with the EU session which opens around 06:00 GMT and closes around 16:00 GMT. Then the US session, which overlaps with the EU session, opens around 13:30 GMT and closes around 21:00 GMT. Then the cycle starts over again with the Asian open.
This means you can theoretically trade forex non-stop from 21:00 Sunday GMT (summer hours) until 21:00 GMT Friday!