FOREX is derived from the words Foreign Exchange and is the largest financial market in the world. Unlike many markets the FX market is open 24 hours per day and has an estimated $1.2 Trillion in turnover every day. This tremendous turnover is more than the combined turnover of the main worlds’ stock markets on any given day. This tends to lead to a very liquid market and thus a desirable market to trade.
Unlike many other securities (any financial instrument that can be traded) the FX market does not have a fixed exchange. It is primarily traded through banks, brokers, dealers, financial institutions and private individuals.
Trades are executed through phone and increasingly through the
Internet. It is only in the last few years that the smaller investor has been able to gain access to this market. Previously the large amounts of deposits required precluded the smaller investors. With the advent of the Internet and growing competition it is now easily within the reach of most investors.
After reading the book, we will have a basic understanding of how the FX market works and who the main players are, what next?
You are now going to have to decide the best way to trade the market. The two most common approaches are that of fundamental analysis and technical analysis.
Fundamental analysis concentrates on the forces of supply and demand for a given security. This approach examines all the factors that determine the price of a security and the real value of that security. This is referred to as the intrinsic value. If the intrinsic value is below the market price then there is an opportunity to buy and if the market is above the intrinsic price then there is an opportunity to sell.
Technical analysis is the study of market action, mainly through the use of charts and indicators to forecast the future price of a security.
Download complete book: Introduction to Forex
The purpose of this ebook is to introduce the forex market to you. As with many markets there are many derivative of the central market such as futures, options and forwards. In this book we will only be discussing the main market sometime referred to as the Spot or Cash market.