What is the Forex Market?
The Foreign Exchange Market, usually called Forex, is where currencies are traded. It is the most liquid and largest market in the world, with a turnover exceeding $ 5.000 billion per day, according to the latest figures released by the Bank for International Settlements in its triennial survey. There is no central exchange as currency trading is conducted electronically and in different location, generating an “over the counter” market (OTC).
The reasons why people are exchanging currencies are diverse. They could be related to commercial trading (companies which are importing or exporting goods and need to pay or receive payment in other currencies), to investment carried out abroad or to travelling and tourism. However, they could also be related to speculation.
A further aspect of this impressively huge market is the fact that it is open continuously from Sunday afternoon until late Friday evening late. For more than 5 days per week currencies are exchanged worldwide in all the most important financial, starting in the Middle East on the Sunday afternoon, continuing through the evening in Australia, and later in Tokyo, Hong Kong, Singapore. When the Asiatic exchanges close, Frankfurt, Paris, Milan, Madrid and Zurich are ready to open (or are even already operating).
Just one hour later London is ready to open its trading sessions. The English capital is also the largest market in the world, with almost 40% of the world volumes transacting here. In the afternoon the trading continues, involving the US markets. Later on it is Australia once more, followed by Asia, with this routine continuing five and a half days per week. Prices are changing constantly and the currency market is usually extremely active at all times of day. Liquidity is obviously higher when the largest exchanges are open and traditionally at times when both the London and New York markets are open.