Forex Basics - What is Forex Anyway?

Forex stands for foreign exchange market. It was created to allow banks across the world to trade currencies in an organized fashion. Before the forex market was begun, it was very difficult for countries like the U.S. and Germany to trade goods because they did not use the same currency. The forex market gave world traders liquidity and a standard for valuing one country's currency against another.

The forex market is very different from other markets for the following reasons:

1. It has no central location. Banks from all over the world trade their currency on a large network made up of computers world-wide.
2. It has massive amounts of liquidity. Over $4 trillion are traded on the forex market each day. Compare that to only $25 billion on the New York Stock Exchange.
3. It is open 24 hours a day, 5 days a week. How? It is always business hours somewhere in the world (except the weekend). Orders are routed through the network to whichever banks are open.

The 3 largest trading centers for the foreign exchange are London, New York, and Tokyo. For this reason, the trading sessions are generally broken up into the European session (2AM EST - noon EST), the U.S. Session (8AM EST - 5PM EST), and the Asian session (5PM EST to 2AM EST).

If you want to get started in the forex, you can open a demo account with several brokers. Demo accounts allow you to trade with simulated money under real market conditions. Signing up for a demo account is completely free, so you have nothing to lose.