What is the forex market?
Forex is an abbreviation of Forein Exchange, which means foreign exchange. The Forex market, also known as the foreign exchange market, is the largest and most liquid financial market in the world.
Forex Market Participants
The structure of the forex market includes the following components:
- Central Banks: All countries have central banks, which play an important role in managing currencies and maintaining economic stability.
- Commercial Banks: These banks provide services to individuals and organizations to conduct foreign exchange transactions.
- Investment Funds: These are organizations and individuals with large amounts of money to invest in the foreign exchange market.
- Brokerage Companies: These companies provide platforms and tools for users to conduct foreign exchange transactions, and collect commissions from their customers' transactions.
- Individual Traders: These are people who participate in the foreign exchange market to make a profit by buying and selling currency pairs.
- Financial Information Systems: These tools and services help individual traders and institutions monitor and analyze market trends to make investment decisions.
All of the above components affect the volatility of the forex market and create a challenging environment for traders.
The forex market is a decentralized market
The Forex market is considered a decentralized market because there is no single exchange that manages the entire market. Instead, Forex is made up of a large number of banks, financial institutions, and individuals around the world who conduct currency trading transactions between countries.
Therefore, the decentralization of the Forex market allows investors to open trading accounts and interact directly with the market through brokers or electronic trading platforms. This also means that prices and trading volumes in the Forex market can change rapidly and frequently, due to the influence of many diverse factors such as stock markets, economic fluctuations, monetary policies of countries and other global events.
What products are traded in the forex market?
Currency. This is a global market where participants can buy, sell, and exchange currencies.
To make it easier to understand, you can think of buying and selling currencies as buying stocks of a country, like buying stocks of a company.
The price of that currency often directly reflects the market's view of the current and future health of the economy it represents.
Major currencies
They are called “major currencies” because the trading volume with these currencies is the largest and they represent the largest economies in the world.
Code | Country | Currency | Nickname |
USD | United States | Dollar | Buck |
EUR | Eurozone | Euro | Fiber |
JPY | Japan | Yen | Yen |
GBP | Great Britain | Pound | Cable |
CHF | Switzerland | Franc | Swissy |
CAD | Canada | Dollar | Loonie |
AUD | Australia | Dollar | Ausie |
NZD | New Zealand | Dollar | Kiwi |