An Introduction to FOREX

Forex is the nickname for the Foreign Exchange Market. In
the United States, there are several branches of the stock
market, each with their own name. For instance, some
stocks trade on the Dow Jones, others on Nasdaq. Of
course, all stock market transactions in the United States
take place on the New York Stock Exchange (NYSE). In
other countries the same is true. There may be one or more
distinct markets.
However, international trade takes place on the market
termed the Foreign Exchange Market, or Forex. Several
countries across the world in almost every time zone
participate in trade on Forex, with multiple currencies being
utilized and stocks and commodities from all participating
countries being offered for trade. Because there are so
many nations and time zones involved, Forex does not
function as a “business day” entity like most domestic stock
markets. It remains open for trade 24 hours a day, 5 days a
week.
Of course, these additional hours increase the risk factor
intensely for those of us who are human and obviously
cannot monitor our investments 24 hours a day. This means
that the value of your holdings could potentially plummet overnight, while you sleep, because other countries are still
trading while you are in a dream world. Again, it is like a
car – there are many moving pieces under the hood, and
just because you cannot see them does not mean they are
not functioning.
This is one reason for several safety options, like limit
orders, which we will discuss later. This is also why it is
strongly recommended that your first attempts to make
money on the stock market are not transactions that take
place within the Foreign Exchange Market but on a standard
nine-to-five domestic trading market. In our car analogy,
this would be comparable to having asked someone who has
never driven or even changed the oil in a car to rebuild the
engine.