What is forex?

The foreign exchange market, or Forex, is one of the world’s largest decentralized over-the-counter markets available. Around the world, financial institutions, speculators and investors act as buyers and sellers around the clock, 24 hours a day, six days a week.

As a result, the currency markets act as a forum for businesses to convert one currency into another, help with the daily management of international portfolios holdings or facilitate trades with speculators both large and small. Additionally, the FX market is unique in several distinct aspects, making it a market of choice when compared to other markets, ie. equity, commodity or bond markets.

• Large market liquidity.
  With a daily turnover of approximately $3 trillion dollars a day, the foreign exchange market provides traders and investors with a tremendously liquid environment. This helps in suppressing market manipulation and boosts the ease at which transactions can be completed.
• Worldwide access.
  The market is decentralized, with no one location to call home. As a result, the currency market is able to function transparently around the globe and around the clock. Operations are continuously linked 24 hours a day except Saturdays. Market hours: Sunday 5pm EST to Friday 4pm EST.
• Dozens of Determining Factors.
  Unlike equity or commodity markets, FX markets are swayed by a lot of different events. Aside from the typical economic releases, currencies are affected by interest rates, political events and even naturally occurring disasters. The all encompassing nature of this investment vehicle make it difficult for manipulators or analysts to sway the market one way or the other.
• Leverage and Margin.
  Available in other forums, FX markets also provide a level of leverage to traders in order to benefit from market moves. Adequate margin and leverage levels allow the market participant to profit from rather small moves in the overall trend of currencies.
• Lower Transaction Costs.
  Compared to other markets, trading in the Forex market is cheaper. In the FX market, bid/ask spreads are smaller, can be as low as 1 to 2 pips, compared with wider spreads in the equity and commodity markets. Additionally, FX brokers do not charge a separate commission on every trade while their stock market counterparts can charge a commission whether you buy or sell in the market.