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FOREX means foreign exchange. The FOREX
market is the global inter-bank market where all currencies are traded.
To exchange two currencies one should sell one currency and buy the
corresponding amount of another.
If you think one currency will appreciate against another, you may
exchange that second currency for the first one and stay in it. In case
everything goes as planned, some time later you may make the opposite
deal - exchange this first currency back for that other - and collect
profits.
Four major currency pairs are usually used for investment purposes. They
are: Euro against US dollar, US dollar against Japanese yen, British
pound against US dollar, and US dollar against Swiss franc. The
following notation is used for these currency pairs: EUR/USD, USD/JPY,
GBP/USD, and USD/CHF. You may consider them as "blue chips" of the FOREX
market. No dividends are paid on currencies. The investment profits come
from well known "buy low - sell high".
Transactions on the FOREX market are fulfilled by dealers at major banks
or FOREX brokerage companies.
FOREX is the world wide market, so when you are sleeping in the North
America some dealers in Europe are trading currencies with their
Japanese counterparties. Therefore the FOREX market is active 24 hours a
day and dealers at major institutions are working in three shifts.
Clients may place take-profit and stop-loss orders with brokers for
overnight execution.
Price movements on the FOREX market are very smooth and without gaps
that you face almost every morning on the stock market. The daily
turnover on the FOREX market is about $1.2 trillion, so investor can
enter and exit position without problems. The fact is that the FOREX
market never stops, even on the day of September-11, 2001 you could
obtain two-side quotes on currencies.
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