Forex Basics Course - Lesson 1: What is Forex?
The foreign exchange market is usually referred to as the Forex or FX market. These terms are used to denote the financial market that offers currency exchange.
There are many financial markets across the globe, stock markets and commodity markets are some of these financial markets. Forex is the market for buying and selling currencies.
Many financial markets have an exchange - a central place where financial goods are bought and sold - such as the New York Stock Exchange. The Forex market has no centralised exchange, which creates some great advantages, including round-the-clock trading, easy access to the market and lower trading costs.
When is Forex traded?
All exchanges have trading hours (a time of day when financial products can be traded). These trading hours are generally set according to the local time of the exchange. The Forex market has no centralised exchange, so no local trading hours. Instead, currencies can be traded 24 hours a day.
Forex is traded in sessions
Due to the 24 hour nature of the Forex markets, trading times are split into 3 manageable trading trading sessions. These are generally referred to as the Asian Session, the European Session and the US Session. Sometimes these sessions are also referred to as the Sydney and Tokyo Sessions, the London Session and the New York Session.
The illustration below should provide some clarification...
EST 1700 - 0400
GMT 2200 - 0900
EST 0300 - 1200
GMT 0800 - 1700
EST 0800 - 1700
GMT 1300 - 2200
Currencies have no market value unless they are compared to the price of another currency. For this reason, currencies are traded in pairs, which are usually referred to as Forex pairs or currency pairs.
Here are some examples of commonly traded Forex pairs...
AUD/USD - Australian Dollar / US Dollar
EUR/GBP - Euro / British Pound
GBP/USD - British Pound / US Dollar
USD/JPY - US Dollar / Japanese Yen