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What is Forex?

// January 31st, 2010 // 1 Comment » // Forex Articles

What is FOREX?

Foreign Exchange, FX or FOREX is the international market where various currencies are bought and sold. The format is to buy one currency and sell the other at the same time. Forex is the largest financial market on the planet, with an average daily turnover of over $1 trillion dollars, which means it is very, very liquid and liquidity is a very important factor when choosing markets to trade. You can trade Forex 24 hours a day. Unlike commodities , Forex has no central exchange.
The most commonly traded currencies are the US Dollar – USD, Japanese Yen – JPY, Euro – EUR, British Pound – GBP, Swiss Franc – CHF, Canadian Dollar – CAD, and Australian Dollar – AUD. The smallest price increments a currency can make are called pips. To calculate the value of a pip, you divide the pip by the rate of exchange and then multiply it by the number of units traded. The forex market is highly leveraged, as much as 100 to 1.

The difference between the bid and ask prices is called the spread. A narrow spread usually signifies high liquidity. Your position must move in your direction by an amount equal to the spread in order to break even on your trade.

The most popular Forex trading is often done using mini contracts, which are 10 times smaller in size than the standard contracts. Typically the standard size for a lot is 100,000 units of the base currency, and 10,000 units if it’s a mini.

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U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.

CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.