FOREX: THE ATM OF THE INVESTMENT WORLD

FOREX: THE ATM OF THE INVESTMENT WORLD
Foreign Exchange currency trading, otherwise known as the forex market,
offers a completely different investment asset class that offers leverage and
virtually unrestricted access 24 hours a day. Forex trades virtually around
the clock from the Asian market open on Sunday night until the U.S. market
close on Friday afternoon. One of the attractions from an individual
trader’s perspective is that there is this constant access to make a trade. In
other words, in every transaction, a trader is long one currency and short
the other. A position is expressed in terms of the first currency in the pair.
For this reason, currencies are always traded in pairs; for example, if you
have purchased euro and sold U.S. dollars, it would be stated as a euro/dollar
pair. With a volume of over $1.5 trillion daily, the Foreign Exchange
market is the largest and most liquid financial market in the world—more
than three times the aggregate amount of the U.S. equity and Treasury markets
combined. This means that a trader can enter or exit the market at will
in almost any market condition with minimal execution risk. Due to the
sheer size of liquidity, a continuous supply-and-demand driven product (we
all use and need money), and the accessibility of trading make many professional
traders consider the forex market like a bank’s automatic teller
machine (ATM).
The forex market is so vast and has so many participants that no single
entity, not even a central bank, can control the market price for an extended
period of time. Unlike other financial markets, the forex market has
no physical location, no central exchange. It operates through an electronic
network of banks, corporations, and individuals, trading one currency for
The Business of Trading Money 5
another. The lack of a physical exchange enables the forex market to operate
on a 24-hour basis, spanning from one zone to another across the major
financial centers.