What are the Forex markets?
If you are interested in starting trading the Forex markets it is important for you to know how the market works and what options are open to you. We define below some of the key aspects of the Forex Markets.
The Foreign Exchange, or Forex market is the marketplace on which currencies are bought and sold. There is no centralised Forex market. Instead Forex is traded over the counter (OTC) via major international banks, with the majority of Forex transactions being dealt with by the financial market centres of the Ss, UK and Japan.
The participants of the Forex market are central and commercial banks, brokers, treasury departments and speculators. The market is huge, with Forex transactions worth approximately $3.5trillion being traded daily. A significant majority of this transaction volume is led by Forex speculators.
The Forex market is not only huge, it is volatile. Prices move significantly, and macro economic data release such as GDP, or interest rates can cause large fluctuations in the relative value of two currencies.
The Forex majors, or most active currency pairs, are all USD based, which is by far the most highly traded. The Majors refer to the USD Forex pairs of EUR/USD, JPY/USD, USD/CHF, AUD/USD, GBP/USD and USD/CAD
Forex brokers offer rebates that may be either calculated as a percentage of the spread provided, or a fixed pip rebate per trade. Some brokers offer variable spreads and therefore pip rebates may vary also. Due to differences in the spread between currencies some may pay out a higher pip rebate than others.
