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Why Forex?
The Forex market is booming in popularity worldwide. Traders are abandoning the traditional stock and future markets and moving to Forex in surprising numbers. The Forex Market presents very unique and profitable opportunities for those that truly understand how to trade it. Read more
FAQ
We have compiled a large list of questions which have been submitted to us over time. Please take the time to read through this, as we are sure many of your queries may be addressed here. We have answered a lot of questions so far. But that is fine, we actually hold to the somewhat outmoded belief that the best investor is an informed one! Read more
Resources
We have compiled some handy links and resources and tools for complete newbies to seasoned investors. We hope you find these informative and useful. Read more

 

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What is Foreign Exchange (Forex)?

“Foreign exchange (FOREX) is the arena where a nation’s currency is exchanged for that of another. The global foreign exchange market is the largest financial market in the world in terms of daily volume, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined, and about 6-8 times higher than the volume in the stock exchange worldwide.

Forex Trading

Forex Market

The commodities traded on Forex are national currencies. Unlike other financial markets, the Forex market has no physical location and no central exchange. It operates through a global 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 in all the major financial centers. In essence, it is a truly global market, which operates around-the-clock and around-the-globe. The global nature of the Forex market, utilizing modern information technologies and financial services, enables private investors to participate in the market from their homes or offices now via telephone or computer with an internet connection.

Traditionally, retail 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. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the FOREX market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets.

The Forex market is quite different than a market such as the stock market. As a result of its global dimension, the Forex market is open 24 hours a day, which enables investors to correct their positions at any point in time. Given the large number of players, the Forex market has narrow spreads and virtually no price gaps. The lack of price gaps typically enables investors to count on non-slippage order execution. However, in a very volatile market the possibility for slippage exists.

The large volume of participants also reduces opportunity for insider information. To put it simply, there has never been a case of complete non-recoverable currency collapse in a developed country. The volatility of leading currencies rarely exceeds 1% per day, in contrast to the volatility of stocks, which may fluctuate by up to 10% over one trading session. The Forex market generally provides more opportunities for leveraged trading (although it should be noted that a higher leverage size is associated with higher risks).

According to New York time, trading begins at 2.15pm on Sunday in Sydney and Singapore and progresses through to Tokyo at 7pm, London at 2am and reaches New York at 8am. This leaves investors free to respond to global political, economic and social events when they take place, day or night.” – RB Capital Management.