The Cash Foreign Exchange
Trading the Foreign Currency Market for Greater Investment Opportunities
What is Forex?
The Forex market is a cash
inter-bank or inter-dealer market established in 1971 when floating
exchange rates began to materialize. The simplest definition of foreign
exchange is the changing of one currency to another. In comparison to
the daily trading volume averages of $300 billion in the U.S. Treasury
Bond market and the less than $10 billion exchanged in the U.S. stock
markets, the Forex market is huge; in September 1992 The Wall Street
Journal estimated the trading volume at $1 trillion per day. Today, it
is believed to have grown in excess of $3.2 trillion per day.
The most important foreign
exchange activity is the spot business between the dollar and the four
major currencies (British Pound, Eurodollar, Swiss Franc, and Japanese
Yen). Participants in the market consist of five main groups: central
banks, commercial banks, other financial institutions, corporate
customers, and brokers.
But Forex is not a
"market" in the traditional sense. There is no centralized
location for trading activity as there is in currency futures. Trading
occurs over the telephone and through computer terminals at hundreds of