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Introduction To Forex Market

The foreign exchange market, also defined as currency market or forex or FX is the biggest and concurrently the only market without any premise, standing floor or headquarter; there is no central exchange, or clearing house. Its daily turnover is much more than 3 trillion dollars, made by transactions between large banks, central banks, currency speculators, multinational corporations, governments. If we combined daily turnovers of all equity stock exchanges on the whole world, we would have to multiply them by more than 10 in order to amount to forex volume.

Now I would like to give you a short overview on key features of forex. The biggest market participants are:
• Deutsche Bank
• UBS (Union Bank of Switzerland)
• Citi

The part of overall volume set up by DB is 19.30%, UBS makes 14.85%, whereas Citi 9.00%.
The most popular currency pairs are EUR/USD (28%), USD/JPY (18%) and GBP/USD (14%). However these are not market participants, who catch investors attention. Neither currency pairs. In fact, what rivets financial world’s sight is leverage. It is responsible for such a huge turnover, since the whole capital involved in forex is few dozen times less.

The risk profile of currency trading is symmetric . It is to observe that the angle between curve and X axis depends on leverage. As the exchange rate may endlessly rise, also ROI is potentially unlimited. Unfortunately it applies as well to loss, due to investing on credit.

As far as advantages of investing in Forex are concerned, one of its most appreciated traits is financial leverage, allowing speculators to turnover amounts 100, or even more, times bigger than their own inputs, what has just been mentioned. Let me illustrate it by example:

Leverage: 1:100
Our investment: 100 ECU
EUR/USD = 1,5732 --> 1,5889 (by 1%)
We have bought 1,5732*100*100=15732 and closed position at $1,5889 per 1 ECU. Our profit amounts to $157. All in all ROI amounts to 98,81%.

One another advantage is...