What are the FX Markets?

The foreign exchange market (also known as FX, Forex or currency market) is a global decentralised financial market for trading currencies. Financial centres around the world act as hubs for trading between a wide variety of buyers and sellers. The forex market is one of the largest financial markets in the world. It operates 24 hours a day 5 days a week and reaches volumes of over $4 trillion trading per day.

Unlike a traditional stock exchange, the decentralised nature of the forex markets means that there is no unique price that may be traded for a currency pair at a specified point in time. The majority of forex trades are done between banks, where two banks will agree on a price at which to exchange a currency pair between themselves. This therefore means that the same currency pair, for example, GBPUSD, could be traded at two different prices by two different sets of counterparties at any moment in time. Other major players of the foreign exchange markets government organisations and large multinational corporations.

The main trading centre for forex is London. However, New York, Hong Kong, Tokyo and Singapore are also important centres. Liquidity in the forex markets follows the main trading sessions around the world. As trading in one financial centre starts to wind down for the day the liquidity then moves to the next major trading hub that is open.

 

The Risks!

If you happened to have sold originally rather than bought because you thought the market was going to go down but instead the market rose as described above, then you would be looking at a $438 loss rather than a profit, as the market would have moved an equal amount against your view.