The Forex market is the largest financial market in the world. With $2.5 trillion exchanged each day, it far outweighs the volume of the New York Stock Exchange. The forex market is made up of a network of banks and other financial service organizations. It does not have any central location that it is headquartered at and there is no specific time that restricts investors and traders from placing orders. Yes, it is a 24 hour market and only closes after Friday 5:00 pm EST.
The Forex market is established by different trading sessions throughout the world that keeps it open 24 hours a day. Major sessions are the London, Asian, and US sessions. The reason these are considered the majors is because this is when most of the volatile movement of prices occur. Especially when two of the sessions overlap and are open at the same time.
The top traded currencies in the Forex market listed from top to bottom:
- United States dollar (USD)
- Europe Euro (EUR)
- Japanese Yen (JPY)
- British pound sterling (GBP)
- Swiss franc (CHF)
- Australian dollar (AUD)
- Canadian dollar (CAD)
Most traders tend to stick with these major 7 currencies due to the fact that they have the most volume moving them each day.
The Forex market also has different instruments that apply to trading this market:
The Spot – This transaction is the quickest transaction out of the group of instruments. The foreign exchange is usually immediately and involves cash rather than a contract. It also is the largest share for Forex market transactions.
Forward contracts – This method is a little less risky and does not involve the exchange of cash until an agreed future date. The exchange rate is agreed on for a specific date by the buyer and seller and the transaction occurs on that specific date, no matter what the market rates are that date.
Future contracts – These are forward contracts but are set with a specific lot size to be traded and a specific maturity date time period. The average contract lengths on futures is usually 3 months for the exchange.
No matter how you approach the Forex market there is always money to be made in this trillion dollar market.