“FX” is an abbreviation of “forex” or “foreign currency”. The forex market is the largest and most liquid market in the world, at around $ 2 trillion per day (over 30 times the daily volume of the NASDAQ and NYSE combined). The forex market is an interbank / business-to-business spot market. In simpler terms, this means that foreign currencies traded in the forex market are traded directly between banks, currency brokers, and currency investors wishing to either diversify, speculate, or hedge currency risk. The forex market is not a “market” in the traditional sense as there is no centralized location for fx trading activity and therefore transactions placed on the forex market are considered over-the-counter (OTC). Forex trading between the parties takes place through computer terminals, exchanges and phones in thousands of locations around the world. CFOS / FX clients can trade through online forex trading platforms and / or over the phone directly with a forex broker on our trading desk.
Until recently, the forex market was not available to the little speculator. The large minimum currency transaction sizes and financial requirements have left this market in the hands of banks, major currency traders and the occasional large fx speculator. Now, with the ability to take advantage of large positions with relatively low capital (margin), the forex market is now more liquid than ever and accessible to most investors.
Five major currencies dominate trade in the foreign exchange markets: the US dollar, the euro currency, the Japanese yen, the Swiss franc and the pound sterling. Foreign currencies are traded in pairs, also known as crosses, in the spot foreign exchange market. For example, buying EUR / USD in the forex spot market simply means that the buyer buys the Euro-currency and sells the US dollar in anticipation of the valuation of the Euro-currency against the US dollar. Likewise, the seller of a EUR / USD contract would sell the euro currency against the US dollar. Official figures show that the US dollar is on one side of 83% of all spot foreign exchange transactions. The “spot” market simply refers to a foreign exchange contract with a quick valuation date requiring settlement within two business days.
Over the past decades, an increase in international trade and foreign investment has made the world’s economies more interdependent. New opportunities for investors have also been created with the fall of communism and the spectacular growth of the Asian and Latin American economies. Today, the supply and demand for a particular currency is the determining factor in determining exchange rates. Many factors such as regularly released economic figures and unexpected news reports, such as disasters or political instabilities, could also alter the advisability of holding a particular currency, thus influencing the international supply and demand for that currency. It’s no surprise that many savvy investors have already taken advantage of fluctuating exchange rates to profit generously.