Introduction To Forex

This is my first post on EasyPips Forex School. In this post I am going to educate you on the basics of the Forex market and Forex trading in a non-boring way.

>>Click here to read our lesson on the history of forex<<

Upon completion of this course you will have a solid understanding of what Forex market and Forex trading is all about, and you will then be ready to progress to learning real-world Forex trading strategies and how to be successful.


WHAT IS FOREX?

According to babypips, it’s the global market that allows the exchange of one currency for another.

If you’ve ever traveled to another country, you usually had to find a currency exchange booth at the airport, and then exchange the money you have in your wallet into the currency of the country you are visiting.

You go up to the counter and notice a screen displaying different exchange rates for different currencies.

You find “Japanese yen” and think to yourself, “WOW! My one dollar is worth 100 yen?! And I have ten dollars! I’m going to be rich!!!”

When you do this, you’ve essentially participated in the forex market! You’ve exchanged one currency for another. Or in forex trading terms, assuming you’re an American visiting Japan, you’ve sold dollars and bought yen.

Before you fly back home, you stop by the currency exchange booth to exchange the yen that you miraculously have left over (Tokyo is expensive!) and notice the exchange rates have changed.

It’s these changes in the exchanges rates that allow you to make money in the foreign exchange market.

The Forex market, also referred to as the ‘Fx market’, ‘Currency market’, ‘Foreign exchange currency market’ or ‘Foreign currency market (Forex is a short form for Foreign exchange), is where banks, businesses, governments, investors and traders come to exchange and speculate on currencies. The Forex market is the largest and most liquid market in the world with an average daily turnover of $3.98 trillion.

The Fx market is open 24 hours a day, 5 days a week with the most important world trading centers being located in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris, and Sydney.

It should be noted that there is no central marketplace for the Forex market; trading is instead said to be conducted ‘over the counter’; it’s not like stocks where there is a central marketplace with all orders processed like the NYSE. Forex is a product quoted by all the major banks, and not all banks will have the exact same price.

Now, the broker platforms take all theses feeds from the different banks and the quotes we see from our broker are an approximate average of them. It’s the broker who is effectively transacting the trade and taking the other side of it…they ‘make the market’ for you. When you buy a currency pair…your broker is selling it to you, not ‘another trader’.

PS: I promised not to make this lesson boring so I had to write about the history of forex as a separate lesson. You can read it >>Here<<

In Our next lesson I will be discussing about forex trading. Stay tuned...