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Forex - The Foreign Exchange Market Explained by John Eather
Forex is the foreign
exchange market. It is very different from other markets in many ways.
The foreign exchange market started in 1970 and finished evolving in
1971. At this time, countries switched from a fixed exchange rate to a
floating exchange rate. The foreign exchange trades not stocks and
bonds but world currencies.
Whereas all other exchanges have a physical location where trades are
made, the Forex does not. The Forex consists of a series of networks
and computers around the world.
London is the premier Forex trading center but there are also other
locations throughout the world that are held as high standing Forex
centers. The Forex is traded on by every country on the planet.
Trading foreign currencies, the Forex market is considered an over the
market. There is no one set rate, but several, also unlike most
commonly known markets in the United States and over seas. The exchange
of currencies can fluctuate greatly.
Depending on circumstances within the countries that are highly traded,
a political or weather related anomaly can throw the entire market. For
this and other reasons, the market is considered to be the most liquid
market on the planet.
As there is no one physical location of the market, trades are made 24
hours a day, 7 days a week. The biggest players in the Forex trading
market are large financial institutions. Central banks, commercial
companies, hedge funds, investment management firms and other high
value companies and institutions trade the Forex.
Due to the high number of countries involved in trading on the Forex,
trade deficits, gross domestic product and inflation play a large part
in the fluctuations of the Forex.
World events play a huge role in volume and rate of exchange on the
Forex. The market has seen the biggest daily fluctuations during times
of political unrest and Presidential elections.
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