Background
Trading Money, or Foreign Currency, which forms the basis of the Foreign Exchange Markets has become the largest business in the world. The Bank for International Settlements (BIS) estimates that the "daily" turnover in this market is in excess of US$ 1.5 trillion today.
In the last decade Financial Markets witnessed an explosion in the use of innovative financial instruments which are commonly called "derivatives". It is the growth of these new derivatives, or by-products, which contributed to the continued growth of the Forex Market. The growth of the Forex Market can further be attributed to its substantial liquidity and to the well-ordered manner in which it functions. Today, Forex is an essential element of all international transactions.
How The Forex Market Works
The Forex market operates on the basis of various financial institutions and other market participants trading with each other as counter-parties. Currencies are not traded in a specific physical market place such as Stocks and Futures that are traded on an exchange. Through technological advances, the networks of banks and brokers have gained access to a virtually instantaneous system of global transfers of information, data and funds. Being a global 24 hours (virtual) market, Foreign Exchange has gained a significant advantage over other financial products which are limited to certain time zones or have to endure the erratic strains and confusion of trading floors.
Today, banks and brokers operate on screen based systems such as Reuters, Bloomberg and other proprietary systems; banks and brokers continually update two-way prices that they are offering to their customers and counterparts. These electronic systems guarantee greater transparency and within an instant, market participants can have access to price information anywhere in the world.
Small margin requirements allow investors to capitalize on market movements. This advantage, combined with the huge liquidity of the market, has made Forex trading extremely attractive for individual investors.
Advantages of Forex
| 1. High Leverage |
Low margin requirements for optimal leverage |
| 2. Selling Short |
Selling short is as simple and cost effective as buying |
| 3. Low Commissions |
A small, pre-determined commission is charged |
| 4. Instant Execution |
Deal Instantaneously on the quoted price! |
| 5. No Expiry Date |
Roll your positions daily; there is no expiry date! |
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