The foreign exchange market (forex, FX, or currency forex market) is actually a worldwide, decentralised, over the counter financial niche for trading currencies. It will be the largest financial market worldwide using a amount of over $1.5 trillion each day worldwide*. Total daytrading site volume is well over 3 times the whole of your stocks and futures markets combined.
With Pepperstone, you will have direct access to the forex ‘spot’ market – a market that deals in the present cost of a financial instrument.
Traditionally, retail investors’ only methods of accessing the foreign currency market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has grown rapidly with time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long term holders and hedge funds all use the foreign exchange market to purchase services and goods, transact in financial assets or even to reduce the potential risk of currency movements by hedging their exposure in other markets.
There is not any central marketplace for forex; trade is conducted over-the-counter. The foreign currency market is open round the clock, five days every week and currencies are traded worldwide amongst the major financial centers of London, New York, Tokyo, Zürich, Frankfurt, Hong Kong, Singapore, Paris and Sydney.
In the forex trading market there is little or no ‘inside information’. Exchange rate fluctuations tend to be a result of actual monetary flows along with anticipations on global macroeconomic conditions. Significant news is released publicly so, a minimum of in principle, everyone in the world receives the same news simultaneously.
Large corporations trade about the FX market to manage revenues and expenses incurred in a variety of currencies through hedging whereby a trade or multiple trades are opened in order to try to minimize around the losses in other trades.
Investors trade currencies to make money. Most forex currency trading is speculative by analyzing market and political news (fundamental analysis) and/or studying the chart history of a musical instrument (technical analysis). Unlike other asset markets, in forex it can be possible to make money from a currency losing value because it is in the currency rising in value.