Forex - The World's Most Liquid Market

Forex, or foreign exchange is a "direct access" trading of foreign currencies. It is essentially, buying and selling currencies. With an average daily volume of $1.4 trillion, which is 46 times larger than all other markets combined, the Forex is the world’s most liquid market on the planet.

The Forex is also open 24 hours a day during business weeks because it is distributed within banks all over the world and thanks to technological innovations, Forex trading is readily available for small as well as the big traders. So if you are new to trading or just want to know a bit more about Forex, what follows is a few simple facts you may find interesting.

The buying and selling of currencies is always simultaneous in the Forex market. In other words, when buying one currency; you simultaneously sell another in the hope that the currency that you are buying will increase its value in the future more than the currency you now control giving you a net profit. Of course, it only makes sense to use stops to avoid big losses and to lock in profits. If you fail to follow this simple strategy, which surprisingly few do, then you may find yourself in an open trade wherein you’ve either bought or sold a pair of currencies and fail to sell or buy back the equivalent amount to lock in your profit.

We’ve talked about forex currency pairs, but what are they? Forex Currency pairs are usually written as symbols of two currencies, for example USD/PHP, USD for the U.S. Dollar, and PHP for the Philippine Peso. The first set of symbols, in this case USD, is called the base currency, and the second set, PHP, is called the second currency or quote currency. Since the U.S. dollar is the most dominant currency, it is usually the base currency, meaning that quotes are shown as a fraction of the U.S. Dollar. The exceptions to these are the Euro, the British Pound and the Australian dollar, which are quoted as dollars per foreign currency.

Now forex, has a "bid" and "ask", like any other traded financial product. The ask is the price at which the "market maker" asks for the base currency in exchange for the counter currency. As a result, the bid is the price at which the market maker buys the base currency to exchange it for the counter currency. The spread is the difference of the bid and ask, you’d want to keep this low to maximize profit.

There are a multitude of trading station programs provided on the internet that provide foolproof, trading in forex, one such example, is RefcoFX trading Station, which monitors your forex margin. A Forex margin deposit is a good faith deposit or insurance to help insure your account has the funds to cover any unexpected losses. RefcoFX checks Forex margin availability before a trade ensuring that you really do have the funds to execute the trade, and will prevent you from doing so if you don’t. This system also calculates and updates your account in real time. Most other forex trading program platforms provide this, so if you’re looking to trade forex on the net, be sure to find a platform suitable to your needs. If you ever drop below your margin requirements, these programs automatically shut down, to prevent you from having negative funds or a marin call.

Another feature of Forex is the fact that trades must be completed in two business days. What’s nice about programs like RefcoFX is the fact that they have automatic rollovers, which exchanges your expiring contract for the next most active contract month within two business days from the date of rollover. Swap dates are determined at the interbank level and can be traded due to the differing interest rates between currencies, which changes on a daily basis, so be careful when doing a rollover.