The foreign exchange market (forex or FX for short) is one of the most exciting, fast-paced markets around the world. Until recently, FX trading in the currency market had been the domain of large financial institutions, corporations, central banks, hedge funds and extremely wealthy individuals. The emergence of the internet has changed all of this, and now it is possible for average investors to buy and sell currencies easily with the click of a mouse through online brokerage accounts.
Extreme liquidity and the availability of high leverage has helped to spur the market's rapid growth and made it the ideal place for many traders. Positions can be opened and closed within minutes or can be held for months. Currency prices are based on objective considerations of supply and demand and cannot be manipulated easily because the size of the market does not allow even the largest players, such as central banks, to move prices at will.
The FX market provides plenty of opportunity for investors. However, in order to be successful, a currency trader has to understand the basics behind currency movements.
The FX market represents the electronic over-the-counter markets where currencies are traded worldwide 24 hours a day, five and a half days a week. The typical means of trading FX are on the spot, futures and forwards markets.
Currencies are "priced" in currency pairs and are quoted either directly or indirectly.
Unlike conventional equity and debt markets, FX investors have access to large amounts of leverage, which allows substantial positions to be taken without making a large initial investment.