What is Forex

FOREX means foreign exchange. The FOREX market is the global inter-bank market where all currencies are traded. To exchange two currencies one should sell one currency and buy the corresponding amount of another.

If you think one currency will appreciate against another, you may exchange that second currency for the first one and stay in it. In case everything goes as planned, some time later you may make the opposite deal - exchange this first currency back for that other - and collect profits.

Four major currency pairs are usually used for investment purposes. They are: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc. The following notation is used for these currency pairs: EUR/USD, USD/JPY, GBP/USD, and USD/CHF. You may consider them as "blue chips" of the FOREX market. No dividends are paid on currencies. The investment profits come from well known "buy low - sell high".

Transactions on the FOREX market are fulfilled by dealers at major banks or FOREX brokerage companies.
FOREX is the world wide market, so when you are sleeping in the North America some dealers in Europe are trading currencies with their Japanese counterparties. Therefore the FOREX market is active 24 hours a day and dealers at major institutions are working in three shifts. Clients may place take-profit and stop-loss orders with brokers for overnight execution.

Price movements on the FOREX market are very smooth and without gaps that you face almost every morning on the stock market. The daily turnover on the FOREX market is about $1.2 trillion, so investor can enter and exit position without problems. The fact is that the FOREX market never stops, even on the day of September-11, 2001 you could obtain two-side quotes on currencies.