Forex Basics – What Is Forex 101? - Forex Anatomy

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Forex Basics – What Is Forex 101?

At Forex Anatomy.com, our team of writers, analysts, and traders desire to simplify some of the complex forex trading concepts into easy-to-understand components. In other words, we “dissect” the forex market for you, and pull out all of the vital components that are necessary for productive currency trading. We will not only identify these core trading strategies, but we will also analyze these methods of trading, in the same manner that a professor would in your college anatomy class.

Now, there are plenty of resources about the forex market that you can find all over the web. However, the aim of ForexAnatomy.com is to give you a rock solid education on forex trading, and introduce you to a pattern of forex market analysis that few blogs and websites on the internet discuss. But, before we introduce you to these complex patterns of trading, it is important that you have a foundational understanding of forex basics.

So, What Is Forex?

The forex market, which is broadly referred to as the foreign exchange market, is the largest and most liquid financial market in the world, with over $5.3 Trillion in volume exchanged each day. If you compare the meager $22.4 billion per day volume of the New York Stock Exchange (NYSE), with the $5.3 Trillion per day volume in the forex market, you will notice a massive difference in billions of dollars between both markets. The NYSE is very tiny when you parallel it with the foreign exchange market. The foreign exchange market is 200 times larger than the New York Stock Exchange.

fx-daily-volume

So, since you now know how enormous and gigantic the forex market is, let me explain to you the general concept of forex trading in “everyday” terms that you can easily understand.

Have you ever traveled to another country, and exchanged your native country’s currency with the currency of the country you were visiting? If so, then you had to look for a currency exchange booth in the airport and read a screen listing different currencies and their various exchange rates. For instance, if you were traveling to Norway from the United States, you would notice that every 12 cents or $0.12 is equivalent to 1 Norwegian Krone. This means that if you traveled to Norway with $100 dollars, then you would receive 851 Krone at the currency exchange desk.

When you do this, you’ve essentially traded in the forex market! You’ve exchanged one currency for another. Or in forex trading terms, assuming you’re a US citizen visiting Norway, you’ve sold USD and bought NOK (Norwegian Krone). So, you’ve already traded in the forex market without even knowing it.

There are also other synonyms that economists or investors may use instead of the common term forex market. You may hear people say foreign exchange market, currency market, forex trading, FX market, FX trading, FX spot, currency spot, foreign currency market, or currency exchange market, to identify this particular financial instrument.

With the creation of new technology, you can now trade this financial instrument anywhere, and at nearly any time. Unlike the various stock exchanges, the foreign currency market is open 24 hours a day, five days of the week. The most important global trading centers in forex are located in London, Zurich, Singapore, Frankfurt, New York, Tokyo, Hong Kong, Sydney and Paris.

Another difference between the stock market and the forex market, is that the latter has no centralized exchange center that provides one set price for a currency among all dealers and brokers. This means that the forex market is a decentralized market, and quotes for various currency pairs can vary among dealers. This may sound pretty scary to you, but since there are thousands of brokers around the world, and the competition is growing, this allows an opportunity for the free market to help in creating competitive pricing among the dealers. So, you will always end up with a good deal for your currency pair.

I have briefly explained some of the forex basics and given you an overview about how this market works, now is the time for you to build upon this foundation and take your forex education to the next level.

If you would like to learn more advanced concepts of currency trading, that will enable you to accumulate massive profits through the principle of compound interest, then I encourage you to sign up at the form below for additional resources on getting started with this multi-trillion dollar exchange.

 

About the Author Marvin Perry

Marvin Perry has been an active trader within the Forex market since 2010. He attended the University of Illinois in Urbana/Champaign, and graduated in 2002 with a double major in Cell and Structural Biology and Chemistry. He currently serves as an FX instructor & Quantitative Analyst for the Forex Anatomy Private Trading Community called "The Lab", where he conducts live weekly trading webinars & instruction on Fundamental Analysis & Inter-Market Interpretations of dynamic asset classes and their influence on currencies.

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