Forex is the simultaneous buying of one currency and selling of another. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another, spanning from one zone to another across the major financial centers.
Traditionally, investors' only means of gaining access to the Forex market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971.
There is considerable exposure to risk in any off-exchange foreign transaction, including, but not limited to, leverage, creditworthiness and limited regulatory protection. Under abnormal market conditions, volatility may substantially affect the price, or liquidity of a currency or currency pair. Moreover, the leveraged nature of forex trading means that any market movement will have an equally proportional effect on your deposited funds. If the outlook is positive, a trader may profit or lose by buying or selling the currency against other currencies. Remember that in volatile, or fast moving market, conditions, substantial losses may occur at any time. This may work against you as well as for you. The possibility exists that you could sustain a total loss of initial margin funds and be required to deposit additional funds to maintain your position. If you fail to meet any margin requirement, your position may be liquidated and you will be responsible resulting as per details in your Client Agreement(s) with your Forex Counter Party.
Low transaction cost - The retail transaction cost (the bid/ask spread) is competitive under normal market conditions. Please note that spreads are not fixed, and may widen during volatile, or fast-moving, market conditions.
Uncorrelated to the stock market - A trader in the Forex market involves selling or buying one currency against another. Thus, there is no correlation between the foreign currency market and the stock market. Bull market or a bear market for a currency is defined in terms of the outlook for its relative value against other currencies. If the outlook is positive, we have a bull market in which a trader profits by buying the currency against other currencies.
Forex market - The backbone of the Forex market consists of a global network of dealers. They are mainly major commercial banks that communicate and trade with one another and with their clients through electronic networks and telephones.
The Forex market is one of the most popular markets for speculation, due to its enormous size, liquidity and tendency for currencies to move in strong trends. Because of this opportunity one could assume that these characteristics would enable traders to have tremendous success. However, success can be limited for a myriad of reasons one of which is a common perception among beginning traders. Many traders come with false expectations of the profit potential and lack the discipline required for trading. Short term trading is not an amateur’s game and is usually not the path for quick riches. One cannot hope to make extraordinary gains without taking extraordinary risks. A trading strategy that involves taking a high degree of risk means suffering inconsistent trading performance and often suffering large losses. Trading currencies is not easy and many traders with years of experience still incur periodic losses. One must realize that trading takes time to master and there are absolutely no short cuts to this process.
* Please note, currency trading is not conducted on a regulated exchange, and as a result there are associated risks with forex trading. There is considerable exposure to risk in any off-exchange Forex transaction, including, but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair.
