24 hours a day, 5 days a week
Leverage: up to 100:1
Trade in the world’s most liquid market
Tight spreads and absence of re-quotes
Trade with no hidden fees
Forex Market – currency (Forex) trading refers to buying and selling currencies on the online foreign exchange market. In other words, this means the purchase or the sale of one currency for another with a view to profit.
Foreign exchange (or forex) markets are the world’s largest markets for international investments and online currency trading. Forex does not have any specific location where currency purchase and sale transactions are performed. It is characterized by a decentralized structure, to which investors from around the world are connected via the Internet.
The Forex market is used to buy and to sell financial assets and is characterized by the absence of sudden price spikes. Therefore, Forex is considered to be the most liquid market in the world. Daily turnover in the market is in excess of USD 5 trillion, with more than 80 percent of the above amount mainly accounting for transactions of financial institutions through which Forex transactions are implemented. The largest market participants include, among others, major central banks, institutional investors (organizations that invest large amounts of money in securities and other assets), currency profiteers, governments, financial service providers (banks and trust and insurance companies) as well as private investors.
The foreign currency market, unlike the stock market, is divided into segments according to different access levels: the interbank market (which includes large commercial and central banks of the world such as Citi, Deutsche Bank, Barclays Investment Bank, UBS AG, HSBC, JP Morgan and Goldman GoldexFX) is at the highest level. Similar to the foreign exchange market, the interbank market is also decentralized and includes major commercial and investment banks. This market accounts for almost 40 percent of transactions of the highest-tier banks. The lower levels include medium and small banks, hedge funds (private equity partnerships that may include only a limited number of investors), commercial companies, retail ECN (electronic communications networks), private forex broker companies, and individual market participants, namely: traders and investors who are private individuals.
With the advent of online trading platforms in 1996, the number of individual private traders involved in transactions with currencies and other financial instruments has grown, resulting in an a new segment in the Forex market in terms of importance and size.
Extensive geographic coverage, huge volumes of trade and non-stop day and night work 5 days a week make the Forex market unique.
Trading is conducted on currency pairs (a pair is a representation of the quotation of one of the currencies in relation to the value of the other currency), in which the first currency is called the base currency and the second is called the quoted currency. For example, the quotation EUR / USD 1.2345 is the price of the euro expressed in US dollars. This quotation means that one euro is equal to 1.2345 US dollars. The most popular currency pairs (also called major) in terms of trading are the pairs that include the US dollar (USD), the euro (EUR), the British pound sterling (GBP), the Swiss franc (CHF), the Japanese yen (JPY), the Canadian dollar (CAD) and the Australian dollar (AUD).
Currency trading takes place around the clock from 10:00 p.m. GMT on Sunday to 10:00 p.m. GMT on Friday. The largest financial centers where the trading occurs are London, New York, Tokyo, Zurich, Frankfurt, Paris, Sydney, Singapore, and Hong Kong. At the bottom of the market, there are three main trading sessions, which are characterized by the maximum trading volumes. It is during these trading sessions that the largest transaction of the day take place: the European, the Asian, and the North American session.
Various factors and important events that have shaped the forex market and currency trading in its present form appeared in prehistoric times when trading was a purely barter exchange, i.e. the exchange of goods without using a currency.
Trading in currencies in the modern form appeared in 1880, when the Gold Standard (a good alternative for the imperfect and the uncomfortable bartering system) was put into circulation. The most important feature of this system is a fixed exchange rate of the currency of one country against the currency of another country regardless of the type of currency (banknotes and coins). This feature not only allows to simplify the exchange of the two currencies but has also provided methods of control of the behavior of the currency and of lowering the inflation.
In the 20th century, there was a strong increase in the number of foreign banks, especially in England, where 40 brokerage firms that provided access to currency trading opened in 1922. Approximately half of the world’s currency exchange operations were conducted in pounds sterling while most major trading centers were New York, Paris, and Berlin. After World War II, the Bretton Woods Agreement, which governed the financial relationship and limits the change in exchange rates of currencies within 1 percent of their price, was concluded. However, after the collapse of the Bretton Woods Agreement, the fixed exchange rate system gradually transformed into the free currency exchange system. By the end of 1970, the foreign exchange market, which was under the strict control of countries and depended on government decisions, had sharply changed its essence and gradually developed into a market with changing rules of the game.
Today, currency trading is very popular among private and individual investors and traders around the world. Online currency trading refers to the purchase and the sale of a variety of tradable financial assets such as debt securities (notes and bonds), equity securities (stocks), and derivatives (futures, options, and swaps).
Since the late 1990s, currency trading, i.e., mutual exchange of currencies of different countries, has been widely used as a way of investing. At that, the exchange is implemented by means of electronic communication networks through brokerage companies. Brokers provide traders with an online trading platform, which the latter can use to enter the market directly and to monitor global markets in real time.
Before the advent of the Internet, market investments could only be done on the phone by giving orders to brokers of the stock market to buy or to sell stocks, bonds, or other securities on behalf of private and institutional clients. Brokerage companies, or dealerships, received market orders from private traders, who were considered to be employees of such companies, and then placed these orders on the stock exchange (for example, in London, Tokyo, or New York Stock Exchange) or arrange a direct exchange between two parties for a commission fee or a specific payment for their services. All customer orders handled by brokers on the the stock market, which acted as intermediaries between investors and the financial markets, were registered in the systems of brokerage firms. The latter were connected to trade halls and stock exchange centers.
The year 1994 was marked by a significant increase in the volume of online trading. That year, the first brokerage companies began offering a revolutionary service, which went on to change the nature of online investments: an opportunity for investors to place trade orders directly online and to trade via computer communication networks.
From that moment on, forex trading or currency trading has gained popularity around the world because it was suddenly available to virtually everyone with an Internet access. As a rule, trading is conducted on an online trading platform, which is provided by a brokerage company. Within this platform, a customer places an order through a few clicks of the mouse, after which the orders are sent to the interbank market (the upper level of the market where the exchange of currency is implemented between banks) by the broker. Immediately after the client sends a request to close the deal, the broker closes the position in the interbank market within a few fractions of a second and credits the profit to or debits the losses from the customer’s account.
Today, any online investor can have direct access to global markets through an online trading platform and can monitor quotations on the 24×7 foreign exchange market (forex) in real time. Trading platforms, among which the MetaTrader 4 platform is the most famous and popular, can be considered the heart of trading. With their help, investors can buy and sell currencies or any other financial securities using built-in trading tools such as technical analysis charts, real-time quotations, news feeds, and custom reverse testing, i.e., an analysis of trading strategies using historical data and an evaluation of their profitability.