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What is Forex
Forex is an international foreign exchange market. Its name was derived from "foreign exchange". Forex is one of the youngest financial markets: it has been functioning since the 70's of the last century. However, it is the largest by volume and the most fast-growing market. The daily trading turnover on Forex amounts to about $4 trillion, which exceeds the total volume of all the US stock markets by 30 times.
Like any other market, Forex trades certain goods. In case of the foreign exchange market, these goods are currencies of different countries.
The currency rate moves are driven by the need of state bodies as well as commercial companies to convert profits earned from selling goods and services abroad into national currency. However, it only accounts for 5% of the foreign exchange market turnover. The remaining 95% is ensured by the capital of speculators aiming at extracting profit from currency rates movements.
A distinctive feature of the foreign exchange market is its stability. It is a well-known fact that the worst thing that can happen to a financial market is its meltdown, the fall of the stock index. However, unlike other markets (stock and commodity markets), Forex is defended owing to the features of its commodity - currency. If shares devalue, it is a financial collapse. If the US dollar has fallen, another currency has become stronger, so it starts moving the market. And this is a good chance to generate additional profit for a trader. Unique stability of Forex lies in the following peculiarity: currency is one of the most liquid and reliable trading instrument.
Speculators are generally interested in the most common (the most liquid) currencies which are called basic or major. At the moment, more than 85% of all trades involve basic currencies such as the US dollar (USD), the Japanese yen (JPY), the euro (EUR), the British pound (GBP), the Swiss franc (CHF), the Canadian dollar (CAD) and the Australian dollar (AUD).
Forex is available everywhere. Thanks to the Internet, you can carry out deals with clients who are on the other side of the world. As it was mentioned above, the foreign exchange market always gives you an opportunity to make profit, i.e. rates fluctuations take place several times a day. Fluctuations of the currency rates, your intellectual potential and new technologies allow building high profitable business right now. On the back of it, services become more topical enabling speculators to trade against each other setting prices within the system.
Another indisputable advantage of Forex is that it is easy to enter. Finding a reliable broker is not difficult since there is a great many of them on the market. The rest depends only on the person who decides to join
* The world discovered Forex after US President Richard Nixon announced the decision to abolish the gold standard on August 15, 1971. This decision ruined the system of stable currency rates and became a climax of the postwar Bretton Woods system crisis. This is when Forex emerged.