Foreign Exchange- Largest Financial Market

The foreign exchange market, also known as the forex market has emerged as the world's largest market with trading of over $3 trillion in daily volume. It is the market where currencies are traded. It is not only the largest market in the world, but foreign currency market also the most liquid and volatile, thus making it clearly very distinct from the other markets.

The trading in forex market is conducted over-the-counter as there is no central marketplace for the exchange of foreign money. This gives complete freedom to the traders to choose from a large number of different dealers and make trades only after comparing the prices. Larger a dealer, the better access they have to pricing at the largest banks in the world.

All trades taking place in the foreign exchange market involve buying of one currency and the selling of another currency simultaneously. As the value of one currency is determined by its comparing it to another currency, it becomes very attractive for both the corporate and individual traders to make money on the Forex. The first currency of a currency pair is called the "base currency. Thee second currency is called the “counter currency.” The currency pair reflects how much of the counter currency is needed to purchase one unit of the base currency. Currency pairs are often thought of as a single unit that can be bought or sold. When purchasing a currency pair, the base currency is being bought, while the counter currency is being sold. The opposite is true, when the sale of a currency pair takes place. There are four most popular currency pairs that are traded most often in the foreign exchange market. These include the EUR/USD, USD/JPY, GBP/USD, and USD/CHF.

The foreign currency market is open twenty-four hours a day, five days a week, with currencies being traded around the world in all of the major financial centers. The following features make this market different in compare to all other sectors of the world financial system:

a) It is highly sensitive to a large and continuously changing number of factors
b) All major currencies are accessible to all the traders
c) Huge volume and liquidity of the market
d) Round-the clock business hours
e) Extremely high efficiency relative to other financial markets.

This purpose of this article is to introduce traders, whether newcomers or professionals to all the essential aspects of forex market, helping them exchange foreign money in a practical manner. It is a good idea to experiment with the foreign exchange market while learning your way around the trading platform using demo accounts. Deciding how much risk to take, deciding how long to stay in the trade, and when to exit the trade, they are a great way to gain practical information on foreign exchange market.