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What is the worlds largest
financial market? Stocks? NO. Not even if you combine the entire
world’s equity markets together!!
The largest financial market in the world is the currency market –
currencies exchange hands at a daily pace estimated in excess of USD$3
trillion a day!! About 30% of this business is done in London, the
world’s largest foreign exchange center.
The Foreign Currency Exchange Market (FOREX) is an international
market place where trading takes place on the world’s major
currencies such as the United States Dollar, the Swiss Franc, the
Euro, the Japanese Yen, and British Pound.
Principally the market exists to enable major financial
institutions, businesses and governments to protect themselves from
adverse fluctuations in currency values thereby enabling them to
manage their risk in international trading. The bulk of the trading
is between 300 large international banks which process transactions
for large companies and governments and for their own accounts.
However, there is also the “speculator” segment in the Forex market.
Speculator traders and investors who invest money to buy and sell
foreign currencies to profit and take advantage from the constant
price fluctuation of foreign currencies. Banks are the largest
speculators in Forex – it is estimated that some banks generate up
to 70% of their revenues from currency speculation!!
Forex trading is not bound to any one floor but done electronically
between a network of banks continuously over a 24 hour period.
The word “market” is a slight misnomer in
describing Forex trading. There is no centralized location for
trading activity (“pit”) as there is in stocks and futures.
Please Note: Because Forex Trading
occurs over the phone and through computer terminals and over the
Internet at locations worldwide, it is subject to additional
risks which should be taken into consideration before entering this
market.
The advent of the internet and commensurate sophisticated software
has opened a whole new world for the small investor allowing him to
trade this market place from the comfort of his dwelling or office.
All trades are calculated on this very sophisticated computer system
and finally executed through the system via a designated market
maker.
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© Copyright Frannor Trading 102 (Pty) Ltd
2002
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