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What is forex ?


Forex is an acronym that stands for foreign exchange. Forex market has no centralized place of trading that could be a trading floor or a broker's board. That is why there is no integrated price setting system. A market works 24 hours 7 days a week (except some days off and holidays). Actually in every time zone (in London, New-York, Tokyo, Hong-Kong, Sidney) there are dealers willing to exchange currency. From the point of pricing Forex includes not only foreign exchange spots but also forward and derivative contracts: futures, options and other contracts.

Today world economy cannot function properly without Forex market; it has a great importance for all the economy. Market players change currency of one state to currency of other state in order to be able to trade in different countries. They are either importers or exporters. Other players exchange currency to buy investment securities for it, thus Forex market becomes a medium. Some dealers buy one currency for other as a kind of investment or in order to hedge currency risk, thus Forex becomes an investment market.

Thanks to using of advanced technologies and internet a daily trade volume of Forex market achieves several billions USD. It is far more than trade volume of stock market. Today everyone who has a computer connected to the internet can become a Forex trader. Even little money (from several tens of dollars and even several dollars) are enough to become a Forex market player. Modern technologies help to raise third parties funds for those who haven’t enough money. Brokers and dealers offer their clients leverage that is 50 or even 200 times more than margin transferred to a trader's account. Market players can gain great profit even if difference between purchasing rate and selling rate is very small.

According to statistics today the majority of transactions made at Forex market are aimed at gaining profit from currency fluctuations. Taking into account a margin trading practice such profit, percentagewise, may be quite large thanks to the possibility to increase a contract size with help of leverage. Nowadays any person from any country can become a Forex trader and it made foreign exchange market very popular and led to its growth.

As a matter of fact Forex market is a number of online trading floors and exchange trading marketplaces, situated all over the world. From point of price setting there are two most influential online systems EBS and Reuters. One more system IMM is made for trading currency futures. Reuters is a kind of financial ICQ. EBS (Electronic Broking Services) is an electronic site modeling offline exchange trading. Forex is an over-the-counter (OTC) or “interbank market”, where transactions are made via internet or telephone.



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