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Understanding the Forex Exchange Market
by Jareth Carter
http://www.forexjoy.com

Also known as FX, Forex is an abbreviation for the
foreign exchange market and is the largest market
in the world. A detailed study on the Forex market
in 1998 by the International Bank of Settlements
(IBS) showed a daily global turnover of $1.4
trillion. This represents an 80 percent increase
over daily global turnover in 1992.

Since this is such a huge market it~s obviously
controlled by very large financial institutions
and commercial banks. Investment banks, money
centers and central banks have a huge role in the
Forex Market. Vast solo transactions of anywhere
from $200 to $500 million are very frequent in
such a marketplace.

Even though the Forex market is a global one,
Great Britain is the epicenter for currency
exchange. Its prime location allows its markets to
open when both the Asian and American markets are
open. Great Britain alone accounts for about 30
percent of the daily activity in the market and a
reported 213 foreign exchange institutions
reported activity to the Bank of England in 1998.
Even the United States, with 93 foreign exchange
dealers only accounts for 18 percent of daily
activity, which comes a distant second to Great
Britain.

Global currencies are exchanged in the Forex
market and traded in pairs. When you look at a
quote, the first currency is always the base. The
US Dollar typically acts as the base currency in a
trade. The exceptions are with the Australian
Dollar, the British Pound and the Euro.

Stocks, bonds, futures and options all have
exchange floors but Forex does not. So the trades
occur straight between the market operators, like
a stock broker, and those who are placing the
order. The orders are processed Via electric
network or telephone. Still the records are
confidential. Trades occur in huge financial
centers that are located in Sydney, Hong Kong,
London, and of course New York.

Now not only can you trade stocks but you can
trade currency. There are different reasons for
this and for wanting to do this. You typically
will trade one currency for another with the hopes
that the one you trade for will go up from what
you paid for it and you will make a profit. It is
important to keep in mind that there is always a
risk involved when investing with currency but it
could pay off big for you.

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