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About Forex

Forex stands for foreign exchange and it is when a nation or country's currency is exchanged for that of another country's currency; hence the word foreign exchange. Little do people know, but Forex is the largest financial market in the entire world. Forex money exchanges hands daily and all together has an incredible $1.9-$3.2 trillion dollars to play around with. The Forex market does not have a concrete office in a certain location; meaning there is no central exchange. How it works is that, it operates around the world through banks, large corporations, and individuals, who trade one currency for another. Because their locations are all over the world it is necessary for them to operate all day, 24 hours a day, except on weekends. They work in every time zone and in every major financial market.

The purpose of the Forex market is to encourage trades and investments; there is a desire for a foreign exchange market because of the strong presence of multifarious international currencies, like the Pound Sterling or the United States dollar, and there is a need for trading in these currencies.

For a number of years, the only way retail investors could gain access to Forex exchange market was by going through banks. And not just any banks, but banks that transacted large amounts of currency for both commercial and investment purchases. In 1971, exchange rates were allowed to float freely and since the trading volume has increased at a very fast rate over the last thirty plus years. Now a days, both importers and exporters, multinational corporations, day traders, speculators, international portfolio managers, longer-term holders, and hedge funds all use Forex market. They use the market for all different reasons including: transactions in the financial assets, and market their pay for both goods and services, reduce the dangers of currency movements by hedging their exposure in other markets.

What makes the Forex unique and separates itself from others is the large trading volume it transacts, and the extreme liquidity of the market. It also has a variety of factors that affect the exchange rate; which in turn affects the trades. The fluctuations on the forex market may look small compared to other markets, but profits can be higher because of the obvious large trading volume and the use of leverage. Leverage can help traders use volumes that are 100 times higher than their capital, or even more. This is a survival of the fittest market and those with the smarts and will to succeed have a tremendous advantage over others.

Forex also stands out because it has been referred to as the kind of market that is the closest to its ideal competition; of course not withstanding market manipulation by central banks around the world. Anytime money is involved, especially in this day and age it is important to be knowledgeable about where money is going and how it is being used. There has been controversy about currency speculators and how they devaluate currency and how that affects national economies. Forex has been around for a long time and it is not going anywhere and the more you know the more money is out there for the taking.

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