Chapter 2
What Is the Forex Market?
IN THIS CHAPTER
Getting inside the forex market’s numbers
Trading currencies around the world
Linking other financial markets to currencies
Getting a feel for currency trading with a practice account
We like to think of forex as the Big Kahuna of financial markets. The foreign exchange market — most often called the forex market, or simply the FX market — is the largest and most liquid of all international financial markets. (See the later section “Getting liquid without getting soaked” for our discussion of liquidity.)
The forex market is the crossroads for international capital, the intersection through which global commercial and investment flows have to move. International trade flows, such as when a Swiss electronics company purchases Japanese-made components, were the original basis for the development of the forex markets.
Today, however, global financial and investment flows dominate trade as the primary nonspeculative source of forex market volume. Whether it’s an Australian pension fund investing in U.S. Treasury bonds, a British insurer ...
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