Forex is an acronym for Foreign Exchange and "FX" is an even shorter abbreviation. It refers to the world-wide cash inter-bank or inter-dealer market that uses a floating exchange rate system. Basically, it is an electronic marketplace where leading banks and large institutions trade currencies. Forex is the world's largest financial market with an estimated average daily trading volume of more than $2 trillion plus; approximately 75 times greater than that of the entire New York Stock Market! In addition, because of the tremendous liquidity, inter-bank currencies offer one of the most powerful and persistent price trends of any major market. A propensity for these strong and sustained movements give inter-bank currency traders a profit making edge that's unavailable in any other market! Over the last decade the volume in these markets has grown exponentially and is expected to continue this trend well into the future. However, for much of its history, Forex trading has been largely isolated to major financial institutions. As it has evolved and grown over time, the foreign exchange market has come to attract other participants such as Banks, Investment Funds, Brokerage Firms, International Companies, and Affluent Individuals. Reasons for participation have varied:
- The banks must manage their own currency deposits in the changing light of their customers' transactions.
- Investment Manages and Brokerage firms from all sectors must now understand the ramifications of the world economy and how currency movements in the global marketplace affect other financial instruments.
- Companies and Institutions that have foreign customers or suppliers must have the ability to hedge their foreign exchange exposure.
- Individual investors have become savvier and recognize that world-wide pressures from foreign economies affect many of our investment decisions.
- From the largest institutions to the individual investor, foreign exchange trading offers the ability to operate in an optimum fashion in today's global economic environment.
