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A Trading Introduction

An overview of the Forex market

FOREX, an abbreviation for Foreign Exchange, is the biggest financial market in the world. With an estimated $3 trillion in currencies traded daily, Forex provides income to millions of traders and large banks worldwide. The market is so expansive in volume that it would take the New York Stock Exchange (NYSE), with a daily average of under $20 billion, over three months to eclipse the total amount traded in just one day on the Foreign Exchange Market.

Forex, unlike other financial markets, is not tied down to an actual stock exchange. Forex is an over-the-counter (OTC) or off-exchange market.

In the FOREX market almost all trading occurs with only a few currencies; the U.S. Dollar ($), European Currency Unit (€), British Pound Sterling (£), Japanese Yen (¥), Swiss Franc (Sf), Canadian Dollar (Can$), and to a smaller degree, the Australian and New Zealand Dollars. These currencies are most frequently traded because they represent countries with the most influential central banks, stable governments, and relatively low inflation rates.

Historically, Forex has been led by inter-world investment and commercial banks, money portfolio managers, money brokers, large corporations, and very few private traders. Lately however, this trend has changed dramatically. With all of the advances in internet technology, and the industry's unique leveraging options, myriads upon myriads of individual traders are getting heavily involved in this ever-growing market.

The foreign exchange market operates 24 hours a day, and, contrary to the stock market, has no official openings or closings. It moves in response to press releases from key central banks, geopolitical events, and reports on the economy from various government statistical bureaus, among many other important factors. When traders are quiet in one part of the world due to nightfall, there are investors somewhere else who are actively trading as it is daytime in their locations.