What is Forex?

What is forex? It’s like a thrilling global adventure where you trade currencies and chase profits!

Imagine a time when people could hop on planes and jet off to different countries. They had to visit those cool currency exchange booths at airports, swapping their money for the local currency.

At the counter, you’d see a fancy screen displaying exchange rates for various currencies. It’s like a high-stakes game, comparing the relative prices of different money from different lands.

Let’s say you spot “Japanese yen” and your eyes widen in disbelief. Your one measly dollar is worth a whopping 100 yen! And guess what? You’ve just become a player in the forex market!

You’ve swapped one currency for another. In forex terms, it’s like you’ve sold your dollars and bought yen, becoming an American-turned-Japanese-traveler in an instant.

But hold on, before you fly back home, you swing by the currency exchange booth again to convert your leftover yen. Surprise! The exchange rates have changed. And these fluctuations in rates are what make forex trading so exciting and profitable.

So, what’s forex all about? Well, it’s the colossal foreign exchange market, affectionately known as “forex” or “FX.” It’s the grandest financial playground worldwide, where currencies from every corner of the globe are bought and sold. With rates changing every second, this market is always buzzing.

Now, here’s the kicker: Only a tiny fraction of these currency exchanges are for practical purposes like international trade and tourism. The majority of forex transactions are driven by speculation and the quest for fortune.

Currency traders, also known as currency speculators, play the game by buying currencies, hoping to sell them at higher prices later on. It’s like being a fortune teller with money!

And here’s where the fun gets mind-boggling. The forex market is so colossal that it makes the New York Stock Exchange (NYSE) look like a timid creature. While the NYSE trades a mere $200 billion daily, forex struts its stuff with a colossal $6.6 TRILLION in trades every day! That’s trillion with a “t.”

Just imagine monsters representing these markets. The NYSE monster would be imposing, making noise, and grabbing headlines. But when you compare it to the forex monster, it’s like a tiny insect. The forex market is a towering behemoth that dwarfs all other financial playgrounds. The NYSE might as well stand for “Scrawny” compared to forex!

And let’s not forget about the cryptocurrency market. It’s even punier compared to forex!

Now, here’s the twist. That jaw-dropping $6.6 trillion figure includes the entire global foreign exchange market. But the part that matters to most forex traders, the “spot” market, is a smaller chunk at $2 trillion per day.

And when we zoom in on retail traders like us, the volume becomes even smaller. It’s hard to determine the exact size, but it’s estimated to be around 3-5% of the overall daily forex trading volumes, roughly $200-300 billion.

So, you see, the forex market is huge, but not as enormous as some would lead you to believe. We don’t fall for the hype; we keep it real.

Besides its size, the forex market has another superpower—it rarely sleeps! It’s open 24 hours a day, five days a week, only taking a breather on weekends. Talk about commitment!

As the sun rises in different financial centers worldwide, the action kicks off. Traders wake up in Auckland/Wellington, then the baton passes to Sydney, Singapore, Hong Kong, Tokyo, Frankfurt, London, and finally, New York. And then the cycle repeats in New Zealand. It’s like a never-ending relay race of global trading!

So, welcome to the thrilling world of forex, where currencies dance, fortunes are made, and the adventure never ends. Get ready to dive into this global market, keeping your eyes on those fluctuating exchange rates and embracing the excitement of trading worldwide.