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Forex Market in Currencies

How Foreign Exchange Market in Currencies Works

FOREX trading is all about trading foreign currency, stocks, and similar type of products. The currency of one country is weighed against the currency of another country to determine value. The value of that foreign currency is taken into consideration when trading stocks on the FOREX markets.

Most countries try to exert and have some control of their currency's value, which ultimately determines the value of their money. Those who are often involved in the FOREX markets include banks, large businesses, governments, and financial institutions.

Forex market involves currency exchange
The Forex market involves trading foreign currency, by weighing the value of one country's currency
against the other. This trading is usually done in large volumes.
  (Image by Pixabay.com)

Forex Market vs Stock Market

What makes the FOREX market different from the stock market?

A forex market trade is one that involves at least two countries, and it can take place worldwide. The two countries are one, with the investor, and two, the country the money is being invested in. Most all transactions taking place in the FOREX market are going to take place through a broker, such as a bank.

Forex Trading Markets

What really makes up the FOREX markets?

The foreign exchange market is made up of a variety of transactions and counties. Those involved in the foreign exchange market are trading in large volumes, large amounts of money. Those who are involved in the FOREX market are generally involved in cash businesses, or in the trade of very liquid assets that you can sell and buy fast. The market is large, very large.

You could consider the currencies market to be much larger than the stock market in any one country overall. Those involved in this market are trading daily twenty-four hours a day and sometimes trading is completed on the weekend, but not all weekends.

Forex Market Size

You might be surprised at the number of people that are involved in forex trading. In the year 2004, almost two trillion dollars was an average daily trading volume. This is a huge number for the number of daily transactions to take place. Think about how much a trillion dollars really is and then times that by two, and this is the money that is changing hands every day!

The foreign exchange market is not something new, but has been used for over thirty years. With the introduction of computers, and then the internet, the trading on the FOREX market continues to grow as more and more people and businesses alike become aware of the availablily of this trading market. FOREX only accounts for about ten percent of the total trading from country to country, but as the popularity in this market continues to grow so could that number.

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"Money is not an invention of the State. It is not the product of a legislative act. Even the sanction of political authority is not necessary for its existence. Certain commodities came to be money quite naturally, as the result of economic relationships that were independent of the power of the State."

Carl Menger - the founder of the Austrian school of economics