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- Forex MarketJanuary 4 2007
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The currency exchange market is the largest market in the world with transactions worth $1.5 trillion taking place in a single day. Forex trading is the selling of a currency and simultaneously buying another currency. Trading is done in currency pairs such as Euro to the dollar or dollar to the yen. The most frequently traded currencies in the foreign exchange market are the US Dollar, the British pound, the Japanese Yen and the Euro.
Unlike stocks and futures, forex trading is not conducted in a centralized exchange. It is considered as an over-the-counter (OTC) market as transactions are executed between two parties telephonically or via the electronic network. The forex market is frequently referred to as the inter-bank market because banks dominate it. However, in recent years the number of other market participants such as multinational corporations, money managers, and speculators has increased significantly, particularly so with the advent of the internet permitting trading on a 24 hour basis.
Common terms used in forex trading:
1. Bid: It is the price at which a buyer has offered to buy the currency.
2. Ask: It is the price at which a seller has offered to sell the currency.
3. Spread: It is the difference between the bid price and the ask price.
4. Intraday: Refers to all positions that are opened and closed at anytime during a normal trading day.
5. Overnight position: Refers to all positions that