What Gets Traded in a FOREX Market?

With over a trillion dollars worth of currencies traded every day, the Forex is the largest market in the world. Although it is primarily a place of exchange for currencies, other products like futures and options are also a part of the contemporary Forex market.

History

The Foreign Exchange (Forex) market has evolved at a rapid pace, transforming the small-time country-to-country currency exchanges of years past into a global bazaar in which everybody from small-time retail investors to multi-billion dollar hedge fund operators trade against one another.

Features

The mainstay of the Forex market is the trading of currencies. The two other actors are currency futures and options, which are called derivatives because they derive their value from the price fluctuations of underlying currencies.

Function

The primary function of the Forex market is to allow all sorts of different parties, from speculators, to investors, to commercial hedgers and central banks, to pursue their objectives in the currencies market.

Significance

The Forex market is significant because of its massive size. On any given day, more than a trillion dollars worth of currencies are traded between millions of different participants around the globe.

Misconceptions

Many people remain unaware of other Forex products like futures and options and think the only way to bet on currencies is to trade spot Forex.

Warning

Many Forex brokers offer leverage in excess of 100:1, meaning that for every one of your actual dollars, you risk one hundred dollars. This gives you the opportunity to make large profits, but can also wipe you out in a hurry.

Resources

• FX Street
• Currency Futures