Foreign Exchange Market

Saturday, September 12, 2009

The foreign exchange market (currency, forex, or FX) trades currencies.
The purpose of the foreign exchange market is to help international trade and investment. A foreign exchange market helps businesses convert one currency to another. For example, it permits a U.S. business to import European goods and pay Euros, even though the business's income is in U.S. dollars.
The foreign exchange market is unique because of
1. its trading volumes,
2. the extreme liquidity of the market,
3. its geographical dispersion,
4. its long trading hours: 24 hours a day except on weekends (from 22:00 UTC on Sunday until 22:00 UTC Friday),
5. the variety of factors that affect exchange rates.
6. the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
7. the use of leverage


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