Forex Market

Market exchange rates, known as the Forex, or FX, - the largest financial market in the world. Its turnover exceeds $ 1 trillion a day, more than 30 times more than the total of all U.S. stock markets.

«Exchange» implies the simultaneous sale of one currency and buying another. Currencies are usually traded in pairs, for example, the euro / dollar (EUR / USD) or U.S. Dollar / Japanese Yen (USD / JPY).

There are two reasons why the buy and sell currencies. Approximately 5% of daily turnover on the Forex market accounts for companies and government agencies who buy or sell goods and services in a foreign country or must convert profits earned in other countries, the national currency. The remaining 95% of turnover - it is a transaction for profit, also called speculation.

The greatest interest for speculators are the most common (most liquid) currencies, ie «Core». To date, over 85% of all transactions constitute transactions in major currencies, which include the U.S. Dollar, Japanese Yen, Euro, British pound, Swiss franc, Canadian and Australian dollar.

Trading on the Forex market round-the-clock starts every day in Sydney, then moves around the globe, along with a light day and the beginning of the major financial centers - first to Tokyo, then London and New York. Unlike other financial markets, the Forex market traders have the opportunity to play on the price fluctuations caused by economic, social and political events, at any time of day and night.

Forex is considered to be over, or «interbank» market, due to the fact that each transaction is concluded between the parties by telephone or using electronic networks. Forex Trading is decentralized, and is not subject to restrictions on exchanges, as happens in the stock or futures markets.

Forex Quotes

At first glance, reading the currency market quotes may seem difficult, but everything comes into place when you remember two basic rules: 1) the first pair - this is base currency, and 2) the value of the base currency is always equal to 1.

U.S. Dollar - the central currency market Forex, and so is the base for many quotations. For the major currency pairs is to be USD / JPY, USD / CHF and USD / CAD. The data, along with many other quotes are defined as the price of one U.S. dollar (USD) in units of the second currency in the pair. For example, the quotation of USD / JPY 120,01 means that one U.S. dollar is equal to 120.01 Japanese yen.

When the U.S. dollar is the base currency, the quotation is growing, with an increase in the value of the dollar in relative terms, and the cost of the second currency - falls. If the quotation already mentioned pair USD / JPY rises to, say, to 123.01, the dollar will become stronger because of it you can now buy more yen.

There are three exceptions to this rule - the British pound (GBP), Australian dollar (AUD) and Euros (EUR). In the case of such currencies, everything is done with an accuracy up to the opposite: quotation 1,4366 GBP / USD means that one British pound equals 1.4366 U.S. dollars.

In these three pairs, where the dollar is not the base currency, the increase in quotes means weakening the dollar, since the purchase of one unit of the base currency, whether it be the pound, euro or Australian dollar, would require more U.S. dollars.

In other words, the increase in quotes means strengthening the base currency, and vice versa - reducing quotes indicates a weakening base currency.

Couples in which there is no U.S. dollar are called cross-currency quotes, but the principle will not change. For example, in quotation EUR / JPY 127,95, one Euro is equal to 127.95 Japanese yen.



In the Forex market you will often see the double quotes, consisting of a double price - buying and selling. The first - the price at which you can buy the base currency (while selling a second currency) and the second - the sale price of the base currency (and buying the second currency).