Forex Market Overview

"FX" is an abbreviation of "forex" or "foreign exchange." Foreign exchange is the largest and most liquid market in the world trading approximately $2 trillion every day (that's over 30 times the daily volume of NASDAQ and NYSE combined). The forex market is a cash interbank/interdealer market. In simplest terms, this means the foreign currencies traded in the forex market are traded directly between banks, foreign currency dealers and forex investors wishing either to diversify, speculate or to hedge foreign currency risk. The forex market is not a "market" in the traditional sense due to the fact that there is no centralized location for fx trading activity and, therefore, trades placed in the forex market are considered over-the-counter (OTC). Forex trading between parties occurs through computer terminals, exchanges and over telephones at thousands of locations worldwide. CFOS/FX clients can trade through online forex trading platforms and/or over the telephone directly with a forex broker on our trading desk.

Until recently the forex market has not been available to the small speculator. The large minimum foreign currency transaction sizes and financial requirements left this market in the hands of banks, major foreign currency dealers and the occasional large fx speculator. Now, with the ability to leverage large positions with a relatively small amount of capital (margin), the forex market is now more liquid than ever and available to most investors.

Five major currencies dominate trading in the foreign exchange markets: the U.S. Dollar, Eurocurrency, Japanese Yen, Swiss Franc and British Pound. The foreign currencies are traded in pairs, also known as crosses, in the forex spot market. For example, purchasing the EUR/USD in the forex spot market simply means the purchaser is buying the Eurocurrency and selling the U.S. Dollar in anticipation of the Eurocurrency gaining value in relation to the U.S. Dollar. Similarly, the seller of a EUR/USD contract would be selling the Eurocurrency against the U.S. Dollar. Official figures show the U.S. Dollar is on one side of 83% of all spot foreign exchange transactions. The "spot" market simply refers to a currency contract with a prompt valuation date requiring settlement within two business days.

Over the past several decades, an increase in international trade and foreign investment has made the economies of the world more interrelated. New opportunities for investors have also been created with the fall of communism and the dramatic growth of the Asian and Latin American economies. Today, supply and demand for a particular currency is the driving factor in determining exchange rates. Many factors such as regularly reported economic figures and unexpected news reports, such as disasters or political instabilities, could also alter the desirability of holding a particular currency, thus influencing international supply and demand for that currency. It should come as no surprise that many shrewd investors have already taken advantage of the fluctuation in exchange rates to profit handsomely.

John Nobile - Senior Account Executive
CFOS/FX - Online Forex Spot and Option Brokerage

Latest News


Currency Trading Market Conditions Remain Challenging: Breakout ...
Daily FX, NY - 15 hours ago
Sharp US Dollar gains have produced profits in several of our currency trading strategies on the week, and a continuation of US Dollar strength would make ...
US Dollar Forecast to Rally Against Euro, British Pound, Fall ... Daily FX
all 4 news articles

Voice of America

Treasury’s Lead Role in China in Flux
New York Times, United States - 3 hours ago
Besides, some noted, China’s currency, by maintaining its peg to the dollar, has risen in relation to the currencies of other trading partners because the ...
Yuan's Fall Watched Ahead of US-China Summit Wall Street Journal
China hopes talks with US boost coordination The Associated Press
Paulson Seeks to Broaden Access to China Wall Street Journal
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Stocks drubbed at open
CNNMoney.com - 16 hours ago
US crude for January delivery tumbled $3.46 to $50.99 a barrel on the New York Mercantile Exchange. In currency trading, the dollar fell against the yen and ...

AFP

Yen Strengthens as Manufacturing Slump Weakens Yuan, Ruble
Bloomberg - 17 hours ago
Bank Rossii, which manages the currency against a basket of dollars and euros to mitigate the effect of currency swings, widened the ruble’s trading band to ...
Dollar Rises as Global Manufacturing and Stock Markets Plunge International Business Times
Down Is Dollar's December Direction Wall Street Journal
Yen Extends Gains as Signs of Global Recession Sap Carry Trade Bloomberg
Bloomberg - Bloomberg
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UK Pound Plunges, Gilts Rise as Data Add to Signs of Slump
Bloomberg - 14 hours ago
The British currency declined against all of its 16 major counterparts tracked by Bloomberg after property Web site Hometrack Ltd. said house values in ...

New York Times

Some Nations That Spurned the Euro Reconsider
New York Times, United States - 2 hours ago
After turmoil in the currency markets nearly destroyed the currencies of Iceland and Poland, the two countries are rethinking their opposition to the euro. ...

GLOBAL MARKETS-Grim economic outlook pummels stocks, oil slides
guardian.co.uk, UK - 9 hours ago
... also lifting the dollar, so it's possible the dollar will get a bit of a bid out of this, but currency trading is going to be choppy," Reid added. ...

AU Preview: Q3 GDP Should be Bo...
ForexTV.com, NY - 1 hour ago
Forex (or FX or off-exchange foreign currency futures and options) trading involves substantial risk of loss and is not suitable for every investor. ...

Ruble Plunge Prompts Doubling of Reserve Spending, Survey Shows
Bloomberg - 6 hours ago
Bank Rossii buys and sells foreign currency to keep the ruble within a trading band against a basket comprised 55 percent of dollars and rest in euros. ...
Russian Stocks, Ruble Drop as Production Falls More Than in ’98 Bloomberg
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Currency Trading Market Conditions Difficult to Forecast: Look for ...
Daily FX, NY - Nov 24, 2008
Currency trading market conditions have been especially difficult to predict as of late, and strategy preferences for our forex trading signals are far from ...

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