The forex trading market (forex, FX, or currency market) is actually a worldwide, decentralised, over-the-counter financial marketplace for trading currencies. It is the largest financial market in the world having a number of over $1.5 trillion per day worldwide*. Total trend trading volume is more than three times the complete in the stocks and futures markets combined.
With Pepperstone, you will get direct access to the forex ‘spot’ market – a market that deals in the current price of a financial instrument.
Traditionally, retail investors’ only means of gaining access to the foreign exchange market was through banks that transacted a lot of currencies for commercial and investment purposes. Trading volume has risen rapidly over time, especially after exchange rates were permitted 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 goods and services, transact in financial assets or reduce the risk of currency movements by hedging their exposure in other markets.
There is no central marketplace for forex; trade is carried out over-the-counter. The forex market is open 24 / 7, five days every week and currencies are traded worldwide amongst the major financial centers of London, The Big Apple, Tokyo, Zürich, Frankfurt, Hong Kong, Singapore, Paris and Sydney.
In the foreign currency market there is little or no ‘inside information’. Exchange rate fluctuations are often brought on by actual monetary flows along with anticipations on global macroeconomic conditions. Significant news is released publicly so, no less than theoretically, everybody in the world receives a similar news as well.
Large corporations trade on the FX market to regulate revenues and expenses incurred in a variety of currencies through hedging whereby a trade or multiple trades are opened to be able to try and minimize around the losses in other trades.
Investors trade currencies for profit. Most currency trading is speculative by analyzing market and political news (fundamental analysis) and studying the chart reputation of a musical instrument (technical analysis). Unlike other asset markets, in forex it is easy to benefit from a currency losing value because it is from the currency rising in value.