The foreign currency market (forex, FX, or currency market) is really a worldwide, decentralised, over the counter financial niche for trading currencies. It will be the largest financial market in the world by using a level of over $1.5 trillion each day worldwide*. Total forex trading volume is more than three times the total of your stocks and futures markets combined.
With Pepperstone, you will have direct accessibility forex ‘spot’ market – a market that deals in the current price of a financial instrument.
Traditionally, retail investors’ only method of accessing the forex trading market was through banks that transacted a lot 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 foreign currency market to fund products or services, transact in financial assets or reduce the chance of currency movements by hedging their exposure in other markets.
There is no central marketplace for foreign currency exchange; trade is conducted over the counter. The foreign currency market is open round the clock, five days a week and currencies are traded worldwide amongst the major financial centers of London, New York, Tokyo, Zürich, Frankfurt, Hong Kong, Singapore, Paris and Sydney.
Inside the forex market there is little or no ‘inside information’. Exchange rate fluctuations tend to be brought on by actual monetary flows along with anticipations on global macroeconomic conditions. Significant news is released publicly so, at the very least in principle, everybody in the world receives the same news concurrently.
Large corporations trade about the FX market to control revenues and expenses incurred in different currencies through hedging whereby a trade or multiple trades are opened in order to try and minimize on the losses in other trades.
Investors trade currencies to make money. Most currency trading is speculative by analyzing market and political news (fundamental analysis) or studying the chart background of an instrument (technical analysis). Unlike other asset markets, in forex it is actually possible to benefit from a currency losing value since it is in the currency rising in value.