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Understanding the Forex Exchange Market
by Jareth Carter
http://www.forexjoy.com
The Forex Exchange Market is also known as FX. FX
is the largest exchange market in the world. The
1998 thorough study of the Forex Market showed a
global turnover of $1.4 trillion daily. That data
represents an 80% increase from the 1992 global
turnover.
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.
The Forex Market is global but Great Britain is
the main place for currency exchange. Their prime
location allows them to open when both the
American and Asian markets are open. Great Britain
accounts for about 30% of the daily activity in
the market and 213 foreign exchange institutions
reported activity to the Bank of England Bank in
the year 1998. Also the US with 93 foreign dealers
accounted for only 18% of the daily activity.
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.
Forex is an over the counter market. This means
that there is no exchange floor like there is with
stocks and bonds and other options. Trades occur
directly between the market operators like a stock
broker and the person who is placing the order.
Trades occur over an electric network or
telephone.
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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