what is forex?

Have you ever exchanged your currency to go on a trip? If you did, whether you knew it or not you were trading forex. Due to easily available, high speed interned forex trading, for speculation purposes, is becoming significantly more and more popular to the retail crowd. There are many names for forex trading, here are just a few examples so you don't get confused as you read along. Forex Trading is also known as Foreign Exchange Trading, Currency Trading, Spot Forex Trading, FX Trading, and the list goes on and on.

The simple definition of forex trading is the simultaneous selling of one currency and the buying of another. Forex Trading can be done for both business and speculation purposes. For example of a business forex transaction is a company buying a resources in a foreign country exchanging their currency into the other country's currency.

An example of speculation is an individual expecting a particular currency to appreciate relative to another therefore buying one and selling the other simultaneously. To take this example one step further you may think that the Euro will appreciate relative to the US Dollar, thus you will buy Euros and sell US Dollars. If the value of the Euro goes up you can sell your Euros back for the US Dollars and lock in your profit. If the value goes down you will incur a loss.

To sum it up, the retail forex market allows you to speculate on the price movements of various currency pairs around the world. The Forex market is the largest market in the world. The average daily volume in the forex market is around $2 trillion per day. Over 85% of this volume is traded for speculation purposes. There are many participants in the forex market including: banks, commercial companies, central banks, investment management firms, hedge funds, retail Forex brokers and individual traders.

Until the late 90's it was difficult for retail traders to speculate in the forex markets. Minimum investments were typically as high as $10 million. Through the development of retail Forex brokers and the internet retail spot FX now makes up over 10% of the Forex market. You can trade forex online for speculation purposes with as little as $200 in your account from you home computer.