Forex Trading In 300 Words or Less
Forex refers to foreign exchange trading. This article expands.
When countries need to repatriate funds, companies conduct international business, speculators bet on currency market fluctuations and banks lend and borrow from each other across borders and hedges are placed on equities positions, the foreign exchange or forex market is in use. Spot forex refers to deals which are settled immediately and takes place without centralized exchange.
Forex derivatives, like forex options and futures are regulated. The Spot market for FX trading is open 24 hours per day 5 days per week. For example, in the UK trading starts normally around 10-11pm on a Sunday evening and finishes the same time on a Friday evening. When the Sun rises over Tokyo, the Asian market opens and as the earth moves around the Sun, the European market opens and is followed by the US market, with overlap of course.
Speculative traders, like hedge funds might use high frequency trading algorithms in order to capture minute discrepancies in pricing. A trading floor in a large bank, like Deutsche-bank, might have a small forex trade team who hire traders to manage accounts traded with proprietary strategies. Retail investors can trade forex as individuals using software like Metatrader 4 and NinjaTrader, much like online stock market brokerage account, using a "margin broker."
Forex can be extremely high risk, especially due to the margin leverage requirements of some brokers allowing trades to be placed allowing the control of up to 500 times the capital in the traders account. Money is made through incremental price changes altering the value of one currency against another - known as a currency pair, for example Euro and US dollar.
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Article written by site admin, Sam Beatson, who writes in more detail about Forex and foreign exchange dealing at the forex blog http://www.fasttrackforex.com. He has published several courses about online forex trading which have been taken by more than 5000 clients in 26 countries. You can learn more about trading forex at FastTrackForex.com