The FOREX or Foreign Exchange market is the largest financial market in the world, growing every day with over $1.5 trillion changing hands on a daily basis. The Foreign Exchange market operates through an electronic network of banks without a physical location or main central exchange, while corporations and individuals trade one currency for another. There are some similarities between the stock market and the FOREX, but with a lot of differences such as higher liquidity than the stock market, and the fact that the Foreign Exchange market never closes and has no brick and mortar exchange. The Foreign Exchange market doesn’t have any time limits – it is open 24 hours, 7 days a week. New Zealand is the first to open at 8am (Sydney time) and then the cycle begins: Tokyo open at 10am Sydney time, European bond market open at 4pm Sydney time, European equity markets open at 5pm Sydney time, London open at 6 pm Sydney time, USA opens at 10:30 pm Sydney time.

The foreign currency exchange is all about money. Buying, selling and trading money from all over the world, anyone can use FOREX and with a probable chance of making profit. A broker can buy EUR when the EUR to USD ratio increases, then sell the EUR and buy back USD for a profit. Always remember, the foreign currency exchange is a very risky market - you can not lose more than your margin investment and the profit can be infinite but never risk more than you can afford to lose, as there are a lot of big “players” who won’t shead a tear seeing you mortgage your house.

FOREX Basic Terms :

Bid – to buy, Ask – to sell, Liquidity – financial ease of transaction, i.e. cash, Trading volume – the amount traded Bid/ask spread (pips) – the difference between the proposed buying price and the actual selling price, OTC – over the counter, Exchange rate – the difference between currency values; for instance, a Canadian dollar is valued at .86 of a US dollar, Hedge funds – large mutual fund companies that control vast amounts of money and are able to manipulate the value of a currency through speculation, Central bank – the national bank of a nation, which usually exerts control over the value of that currency, Bullish (Trading Trend) - When price moves consistently in one direction in the Forex, a trend occurs. When the direction is higher Bearish (Trading Trend) - When the direction of the price is moving lower, Trend Reversal - the direction of market prices is changing, Trading Range - The trading range is actually a sideways chart pattern. It is often used to represent a resting period before the original trend is resumed, Marginal trading - trading with a borrowed capital Leverage - the ratio between the money you deposit in your account (MARGIN) to the actual value, i.e. using a $1,000 to buy a FOREX lot (contract) with a $100,000 value Fundamental analysis - doesn’t rely on Forex charts. It uses both political and economic factors to help determine trades, Technical analysis - try to predict where the prices are going by analysis of historical price activity, Spot Market - Market for buying and selling currencies that are usually for settlement within 2 business days, also known as the value date.