Forex Market FAQ
The Forex Market is a 24 hour market, Forex trading commences in Wellington, New Zealand and moves around the globe as business days begin in each financial centre. The major global financial centres where most forex trading takes place are Tokyo, London and New York. The forex market opens on Sunday at 10:00pm (GMT) and closes on Friday at 10:00pm (GMT).
Forex is said to be one of the fairest and most transparent markets on earth this is mainly because of the large amount of market participants and sheer size and number of transactions. There is not one single country or bank that can completely control the direction of a currency.
Making money trading forex involves buying lower and selling higher or selling higher and buying back lower, using leverage means that you are able to deposit a smaller amount of money to achieve the same buying power as you would have if your bought and sold the currencies outright.
In this example Susan deposits $5,000 into her forex trading account and nominates the leverage on her account to be 1:100. As a result of leverage Susan’s buying power on her $5,000 deposit becomes $500,000. Susan decides to BUY 0.1 lots of the AUD/USD par at a price of 0.99802, 3 days later the price of the AUD/USD is 1.04069 and Susan decides to close her position. Susan’s profit is calculated as (1.04069 – 0.99802) 426 pips. As Susan opened a position of 0.1 lots Susan made a profit of $426 or $1 per pip.
Of course should the AUD/USD moved against Susan below the opening price of her trade to a level of 0.97802 Susan would have incurred a loss on the trade of (0.99802 – 0.95542) 426 pips. As Susan’s positions size was 0.1 lots Mary would have incurred a loss of $426 or $1 per pip.
There is no one central location of the Forex Market, unlike the stock and futures markets Forex is not traded on an exchange but it is traded on an Over-the-Counter (OTC) basis with no central exchange between Banks, Governments, hedge funds and private investors. The forex market is open 24 hours a day 5 day per week.