Off Exchange Retail Foreign Currency Market (FOREX or FX) is the simultaneous buying and selling of one country’s currency for that of another. Profits are gained when the value of the currency changes in favor of the trader.

FOREX is the largest financial market in the world, with a daily average turnover of more than $1.9 trillion, more than 30x the US equity market. Examples of currency trading pairs are US Dollar/Japanese Yen (USD/JPY) and Euro/US Dollar (EUR/USD). The most traded currencies (most liquid), known as the “Majors,” include the US Dollar, Euro, British Pound, Japanese Yen, Swiss Franc, Australian Dollar, and Canadian Dollar.

The FOREX market operates 24 hours a day through an electronic network of banks, corporations and individual traders. The market has no physical location and no central exchange. Trading begins each day in Sydney, and moves around the globe first to Tokyo, London, and ends in New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur, day or night.  

Buying / Selling

In FOREX, currencies are priced and traded in pairs. You simultaneously buy one currency and sell another. Traders can determine which pair of currencies they wish to trade. For example, suppose the current war and political concerns caused investors to put their money in a more stable currency, such as the Euro. This will cause the U.S. Dollar to weaken and the Euro to strengthen. Traders expecting this effect will take advantage of this situation by buying the Eurodollar in the EUR/USD (Eurodollar / U.S. Dollar). Clearly, the objective of the trade is that the market rate or price will change so that the currency you bought (the Euro) has increased its value relative to the one you sold (U.S. Dollar). If you have bought a currency and the price appreciates in value, in order to lock in the profit, you must sell the currency back. An open position is one in which a trader has not sold/bought back the equivalent amount to effectively close the position. In an open position, the profit is not locked in. By trading currency pairs, one currency valued against another, a rate of worth has been established. After all, a country's currency has value only relative to the currency of another country.

Just like in all markets, there are two prices for every currency pair. The difference between these two prices is the spread, or the cost of the trade.

There are two rates for all currency pairs: the bid, or the rate at which traders can sell, and the ask, or the rate at which traders can buy. There is a small difference between the two. This difference, known as the spread, defines the cost of the trade. Spreads are a part of all markets, but are typically "hidden" in the broker-based equities and futures markets. When trading directly with Blue Crown FX, there are no commission charges for trading. (We are compensated by revenues from activities as a currency dealer, including proceeds from buying, selling, converting, as well as holding currencies and interest on deposited funds and rollover fees.)

History of Foreign Exchange

Forex vs Futures