What is Forex

Forex – Does it sound familiar? 

Traveling to other countries is fun. You get to visit several spots and other beautiful places. However, traveling needs money to pay your tickets, foods, and hotels. Right? In order for you to pay those bills including taxes, you need to have the currency of the country where you in. Therefore, you need to find a money exhange booth or counter to make your money (dollars) be converted into local currency.

Forex booths can be found in every country, (or you can also do it before leaving your own country). These counters have several exchange rates for different currencies. Dollars usually have bigger exchange rates when used in other countries, like the Philippines. For every $1, you get around 40-45 pesos. That’s a lot, isn’t it? Therefore, if you have $10, then you’ll get around 400 – 500 pesos in exhange. With that amount, you can already buy 10 cans of soda. How do you feel about that?

That action is a simple participation in forex market and exchange. It’s like buying something from a seller. In this case, it’s a money. You exhange your $ to a Peso. It’s like selling your dollar and buying a Peso. That’s just simple. 

Now, what will happen if you have some more Pesos left in your pocket or wallet, and you are now heading back to your country? I’m sure you can never use that Peso in your country. The best thing to do is to exchange that remaining Pesos to US dollars, right? However, don’t get surprised if you see that the exchange rates are now different than what you had previously. You may get a lower amount or a higher one. Again, this fluctuation in exchange rates allow you to make even more money. This is also the reason why many people participate in the forex market.  When participating to Forex Market, you need to have a clearer understanding about the basics. This will be your key to success. 

Now, what is FOREX?

FOREX or foreign exchange market is considered to be the largest financial market in the world. If you are going to take a look at the New York Stock Exchange, you’ll be amazed of the $74 billion a day trade volume. Now, what’s that compared to the $4 Trillion a trade volume in the foreign exchange market? It’s too small, right? 

To make this a little clearer, let’s use some logic & representation.

Let’s say, the New York Stock Exchange trades a daily volume of $74 billion. That would look like this:

New York Stock Exchange $74 Billion

If you are a person who always keeps on watching News and Current Affairs, like CNN or Bloomberg, you’d probably here about weather, sports or market. It usually discusses several stock markets from different cities or even countries. You might have heard of NYSE, which means New York Stock Market. Again, NYSE trades $74 billion daily volume. Does it sound big? 

If NYSE is big, what more if it’s Forex Market? Look what happens below:

Forex Market

See? It only means that Forex Market is far much bigger compared to a local stock exchange.

Let’s take a look at the average daily trading volume for the (New York Stock Exchange) NYSE, Tokyo Stock Exchange (TSE), and London Stock Exchange (LSE):

Forex

Notice the difference of the numbers? Forex Market is definitely huge and bigger that any other stock exchanges.

However, you need to remember that this $4 Trillion number covers the entire global forex market. This only proves that forex market is indeed big!

So, what do you think about Forex Market? 

Anyway, that’s just one of the basic things about Forex. Now, what exactly do you trade in the forex market? We’ll find out in the next discussion.

For more details about Forex and Forex Signal, please check out our videos here.

Next Lesson: Why Trade ForexAdvantage of Forex

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