What is Forex

Foreign Exchange (Forex) is the simultaneous buying of one currency and selling of another.  The foreign exchange market is the largest financial market in the world, with a volume of over $1.5 trillion daily; more than three times the aggregate amount of the US Equity and Treasury markets combined.  Unlike other financial markets, the Forex market has no physical location, no central exchange.  It operates through an electronic network of banks, corporations and individuals trading one currency for another.  The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another across the major financial centers.  Traditionally, investors only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. 

24 Hour Market - A trader may take advantage of profitable market conditions at any time.  There is no waiting for the opening bell.

High liquidity - The Forex market has an average trading volume of over $1.5 trillion per day.  It is the most liquid market in the world.  This means that a trader can enter or exit the market at will in almost any market condition with minimal execution risk.

Risk - The Forex market (off-exchange foreign currency transactions) provides for a higher degree of leverage. The use of leverage results in additional trading risk.

Low Transaction Costs - The retail transaction cost (the bid/ask spread) is typically less than 0.05% (3-5 pips or points) under normal market conditions.  At ApexForex, the spread could be only 3 pips.

Uncorrelated to the Stock Market - A trade in the Forex market involves selling or buying one currency against another.  There is limited correlation between the foreign currency market and the stock market.  A bull market or a bear market for a currency is defined in terms of the outlook for its relative value against other currencies.  If the outlook is positive, we have a bull market in which a trader profits by buying that currency against other currencies.  Conversely, if the outlook is pessimistic, we have a bear market for that currency and traders may profit by selling the currency against other currencies.  In either case, there is always a good trading opportunity for a trader.

Inter-Bank Market - The backbone of the Forex market consists of a global network of dealers.  They are mainly major commercial banks that communicate and trade with one another and with their clients through electronic networks and telephones.  There are no organized exchanges to serve as a central location to facilitate transactions the way the New York Stock Exchange serves the equity markets.  The Forex market operates in a manner similar to the way the NASDAQ market in the United States operates; thus it is also referred to as an over the counter (OTC) market.

Less Manipulation- The Forex market is so vast and has so many participants that no single entity, not even a central bank, can control the market price for an extended period of time.  As the market has grown even central bank interventions have become increasingly ineffectual and short lived as a tool for controlling the value of a particular currency.