The Forex Capital Market is a currency market where one currency is traded against another. In terms of money traded per day, the Forex Capital Market weighs in at the largest in the world with over 3 trillion dollers changing hands each day.

The many participants of this market include governments, banks, speculators and other financial institutions.

There is no central market as such for the Forex like there is for the NASDAQ or NYSE. Instead, money is traded between banks around the world forming a market commonly known as the Interbank Market. This trading around the world also results in the 24 hour nature of the Forex.

The effect of having such a large market gives the Forex some unique characteristics:

A huge amount of volume

More than $3 trillion per day.

This leads to high liquidity

Making it relatively easy to get in and out of the market.

The amount and diversity of traders in the market

Participants include:

  • Banks - trading billions of dollars a day on behalf of customers or their own accounts.
  • Commercial Companies - to hedge against currency shifts when paying and receiving for foreign goods and services.
  • Central Banks - trading to attempt to control their countries currencies.
  • Hedge Funds - basically large scale speculation.
  • Retail Forex Brokers - catering largely for the general public and smaller scale speculators.

The long trading hours

Monday, 9.00am New Zealand to Friday 5.00pm New York. The main trading centres for the Forex are considered to be London, New York, and Tokyo. When one trading centre is closing the next will be starting.

The wide variety of factors that influence the change in currency prices

Changes in currency rates are largely influenced by different countries GDP growth, interest rates, employment figures, stock markets, budgets and trade deficits.

In recent years, the Forex has become increasingly popular for private traders. Signs of this can be seen in the emergence of the many Retail Forex Brokers who offer enticing amounts of leverage to trade this market. Before trading the Forex it pays to do much research when developing a trading methodology. Many retail brokers offer practice accounts where novice traders can test their trading systems in real time.