Introduction to the Global Forex market
The Forex market is a worldwide market of currencies (called instruments). The market measures the value of a currency in terms of another currency’s value (e.g. $1 = £0.66).
Nowadays our world is a single, large global market. Different currencies change hands anytime, any place – for trading purposes, investments, loans, and partnerships. The globe is an enormous market where the forces of supply and demand are constantly changing due to the range of events taking place each and every day.
Did you know that almost everyone has taken part in Forex activities? Changing currency when flying to a foreign country for a holiday or business trip, giving a quote to a client, or even chatting with friends or colleagues about the dollar, euro, or other currencies, are all ordinary activities that participate in the Forex market.
The Forex market is the most traded market in the world, larger than any other market. Daily trading volume amounts to approximately 5 trillion dollars!! For comparison, the biggest stock market, the NYSE (New York Stock Exchange), has a daily turnover of around 50 billion dollars (which is 100 times less than Forex). Amazing, right? There is no other market equal to the Forex market.
What is Forex? Let’s go back to the holiday example. Say you’re on a short vacation trip from your home in New York to Rome, Italy. By landing at the airport and changing your dollars into Euros you participate in a Forex transaction. A few days later, after flying back from Rome to NY, you change the Euros you have left back into dollars at a slightly different price. In the second act, you executed an opposite transaction to the first, closing a circle of buying and selling of one currency for another.
So far so good? Great!