WHAT IS FOREX

FOREX (FOReign  Exchange )-international currency market. The FOREX market is intra-banking market, established in the 1970-s, after the Bretton-Woods agreement was abolished at the ministerial  meeting of the countries-IMF-members  for the international trade to be transferred from fixed currency courses to flexible ones. Thus, one currency course related to another one is determined by the most evident way-correlation of demand and supply. FOREX is a unregulated market, it is not specifically linked to a location of trading and it represents the combination of all conversion and deposit-currency transactions with various currencies.
Trading is conducted via phone and pc terminals simultaneously in hundreds of financial institutions worldwide.
As a result, another advantage of the FOREX market is that FOREX operates round-the-clock, as the currency exchange does not stop during the whole working week.
As its own financial centre is located in every time zone (London, NYC, Tokyo, Hong-Kong, Sidney, etc.), and the supply-demand persists on the market round-the-clock, the FOREX participants are always present, wishing to buy-sell the currencies. Market participants (central banks, coomercial banks, hedge-funds, etc.) ensure permanent and high liquidity. Daily transaction turnover volume reaches the amount circa 3 trillion USD.

The object of trade transaction at the FOREX market is the Currency Pair, reflecting the changes in value of one currency related to another. For instance, EUR/USD is the currency pair, and in the case we determine the value of one Euro in the US dollars. The expression “Euro rate versus American dollar” (EUR/USD) equals 1.3621” means, that 1 euro costs 1.3621 US dollar. Currency pair rate always contains two quotes. The purchase rate-ask and the selling rate – bid. By the price Bid one can sell currency, located as the first in abbreviation (in our example-the euro), and to buy corresponding amount of currency, ranking second in the , abbreviation (in our case-US dollar). By the price Ask it is possible to buy it, selling corresponding amount of currency, ranking second. The main principle of trading is the same as on the Exchange,-to buy cheap and to sell expensive one currency for another. At that, the order of these actions is not so important, as one can earn on the rate of exchange slump. Now the biggest volumes of trading fall on the US dollar (USD), currency of European Monetary Union (EUR), Japanese yen (JPY), British pound sterling (GBP) and Swiss franc (CHF).

Transactions at the FOREX market are marginal, thus it is possible to conduct transactions in the volumes, significantly exceeding the amount of customer’s funds. The amount of credit leveraging in the FOREX market is determined by the conditions of financial institution, providing for the capability to conduct speculator transactions, and usually accounts for 1:100. Thus, by introducing security of 1000 US dollars, the customer is allowed to transact for amounts, equal to 100,000 USD. The application of such significant leveraging and high market volatility, do allow to make high-yielding investments with high risk level.