Forex is an abbreviated name for foreign exchange. The Forex market is an around-the-clock cash market where the currencies of nations are bought and sold, typically via brokers. For many years, the Forex market was dominated by large institutions such as banks and brokerage firms. However, the Forex market has experienced a major change over the past several years, as a growing number of private investors and traders just like you have started to actively trade. The purpose of this article is to reveal 12 interesting facts about the Forex trading market.



1. What is a Forex trading system? According to Howard Abell: The trading system gives the trader the ability to control his or her emotional states rather than allowing them to control him. A system is a disciplined method for organizing dynamic, ever-changing market phenomena.

2. Forex is the most liquid market in the world, thus making it easy to trade most currencies.

3. Unlike equities or futures trading, you pay no commissions on the Forex deals that you make.

4. According to the Wall Street Journal Europe, the most commonly traded currencies on the Forex market are the U.S. Dollar (USD), the Japanese Yen (JPY), the Euro (EUR), the British Pound (GPB), the Canadian Dollar (CAD), the Australian Dollar (AUD), and the Swiss Franc (CHF).

5. The most commonly traded currency pairs are the U.S. Dollar and the Japanese Yen, the U.S. Dollar and the Euro, and the U.S. Dollar and the Swiss Franc.

6. The U.S. Dollar is involved in nearly 90% of all Forex transactions.

7. Ten financial institutions account for nearly 73% of the total Forex trading market volume. The Top 10 most active traders are Deutsche Bank (17.0%), UBS (12.5%), Citigroup (7.5%), HSBC (6.4%), Barclays (5.9%), Merrill Lynch (5.7%), J. P. Morgan Chase (5.3%), Goldman Sachs (4.4%), ABN AMRO (4.2%), and Morgan Stanley (3.9%).

8. The five major Forex trading centers are London, New York, Tokyo, Sydney, and Frankfurt.

9. The three major Forex trading countries are the United Kingdom (32.4%), the United States (18.2%), and Japan (7.6%).

10. Currency market players typically use Forex analysis as a means of predicting currency price movements. Forex analysis is divided into two types: fundamental and technical.

A fundamental analysis uses economic and political factors, such as unemployment rates, interest rates, or inflation, as a means of predicting currency movements. Fundamental analysis is concerned with the reasons or causes for currency movements.

Technical analysis uses reliable historical data as a means of forecasting these movements. The technical analyst believes that history repeats itself over and over again. Technical analysis is not concerned with the reasons for currency movements (for example, interest rates or inflation). Instead, it believes that historical currency movements are a clear indication of future ones.

11. Margin is referred to as the collateral needed to facilitate the Forex deal. Usually, this is a very small portion of the entire deal, say 1% or 1:100. Please note that margin is a double-edged sword. Without the proper use of risk management tools (for example, the stop-loss option), you can experience substantial losses as well as gains.

12. A stop-loss order is a market order to close a Forex position if or when losses reach a pre-set threshold. According to Bruce Kovner: Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I am getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis.

Trading Forex on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.