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Forex: The Only True Global Market

Date Added: December 24, 2007 08:48:15 AM
Category: Business & Economy

Trading, whether it is stocks, commodities, or derivatives (like futures and options) can be a very lucrative business to be in.

With the decision to become a trader, you must also choose what type of market you will focus on and what instruments you will trade. Will it be shares of publicly traded companies, commodity future contracts like oil and gold, or currencies.

Most of the financial markets that exist in the world today are within the framework of a central exchange, and for that reason they are limited in their scope and daily trading volume. Every market except one, which is the foreign exchange currency market.

The foreign exchange (forex) market has no central exchange, and instead it exists only as a highly interconnected web of bank servers and individual brokers. The 'over the counter' type of trading tends to be much larger in scope than trading centered around a central exchange (such as the NYSE), and for the reason the forex market is hands down the largest financial market in the world with daily volume surpassing $2 Trillion USD.

The forex market is the only true global market that exists, as it is not based in one specific country and instead is created by the perpetual buying and selling of banks and financial institutions in every major city, 24 hours per day.

Unlike traditional exchange-based markets which have set times that they are open and closed, the forex market literally follows the span of daylight around the planet.

When you are a forex trader you need to be familiar with the term 'global trading day.' The global trading day begins with the London market open hours (about 3AM New York time) and continues across all the major cities and time zones.

There are three distinct times throughout the global trading day when there is the most trading activity (and consequently the most liquidity). These times are based around the open-hours of the three major cities in the world where the largest volume of forex activity takes place: London, New York, and Tokyo.

So what does this mean for you, the trader? Because the forex is a global market and there are no set open and closed times, it is possible to trade at any time during the day (except on weekends).

It also means that due to the level of daily trading volume, this market is very liquid and it is virtually impossible to get 'stuck' with an open position.

Because of these lucrative trading features, many firms and brokers have sprung up to cater to the large demand of forex market access. Many of these companies offer highly advanced trading platforms that feature very low commission trading and seamless market entry/exit.

All in all, forex trading is by far one of the coolest ways around to make money today, since all you really need is a broadband-enabled laptop and a funded trading account to make money from anywhere in the world.

By: Marcus Masters

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