The forex world

An Introduction to the Forex Market

Forex is an international system where you can buy and sell foreign currencies in wholesale quantities. It is generally acknowledged to be the largest market in terms of size, bigger than stocks and shares. There are people in the world who make money day in, day out, by using a Forex trading system.
Forex transactions take place 24 hours a day, except on weekends. The market itself is extremely liquid, which means that you can buy or sell on demand. The difference between the buying and selling price is known as the “spread”. Typically, the smaller your transaction size, the bigger the spread.
There is very little, if any, “insider information” in the Forex market. Exchange rates are influenced by a mixture of the flow of money, interest rates and inflation expectations.
Currencies on the Forex market are traded against each other and each market is separate. For instance, the market for the Dollar against the Euro is separate from the market for the Yen against the Pound. But the market for, say, the Dollar against the Pound will reflect what is happening in the other markets that these two currencies are operating in.
Sounds complicated? Well, yes and no. At its most basic, the prices are a reflection of supply and demand for individual currencies. If a currency is in short supply and high demand, the price of that currency will go up. If investors lose faith in a currency, maybe because of inflation or some other factor, then the price of that currency will drop.
Economic factors and political conditions will influence the price at which a currency is traded. Future expectations can also play a part: for instance, if it is expected that a country will implement an interest rate change this is likely to be factored in to the currency price.