The Mechanics of The Forex Market

Before turning our attention to the mechanics of Forex trading it is important to note that, like many other markets, the Forex market is not one single market but is a series of markets many of which are derived from the central foreign currency market.

These markets include trading in options, futures and forwards. For the purpose of this course however we will concern ourselves with the main currency exchange market, which is often known as the Spot or Cash market.

Another term that you will frequently come across in the world of Forex trading is 'Interbank'. Foreign currency trading was originally confined to the major commercial banks and so all currency trading was carried out inter-bank or between the banks. Today, there are many more players in the market including a variety of financial institutions, dealers, brokers and private individuals, but the term 'Interbank' is still commonly used when referring to the Forex market.

We won't stop to examine the makeup of the market here but, if you would like to know more about this aspect of the market, then there are two excellent articles in the Forex articles section of our site entitled The Role Of The Commercial Banks In World Currency Trading and Forex Traders Come In Various Shapes And Sizes.

Although the Forex market exists for the purpose of buying and selling currency the majority or orders placed are never fulfilled. In other words, most of the trading carried out is purely speculative in nature and the bank, institution or individual buying a currency never has any intention of actually taking delivery of that currency but is simply buying and selling to profit from the movement of the currencies concerned.

Recommended books from

Currency Trading For Dummies
by Mark Galant, Brian Dolan
Amazon Price: $16.49
Customer Review: This is a great book if you're a begginer and want to learn more about currency markets (forex), and want to know how it ticks. I'd definitally pick up this book if you're new to currency trading, or just want to learn about it.
 

Forex Strategy 10: Low Risk/High Return Currency Trading
by ROB BOOKER
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Customer Review: This is the most simple common sense fairly useless Forex book I have ever read, actually its more like a pamphlet. Does not explain 10 strategies, just repeats to try to make 10pips in any trade, which is very hard to do with a 10-pip stop loss in this very fast paced moving market. So the strategy to do this? in this book? NONEXISTENT. Never expl...
 

How to Make a Living Trading Foreign Exchange: A Guaranteed Income for Life (...
by Courtney Smith
Amazon Price: $44.10
Customer Review: I've read quite a few books since I've decided to decipher the egnima of Forex. This book is well written and covers some very interesting topics. The stratagies it teaches and some of the perspectives it offer are some of the most useful and luid I have come across.
A definate on your reading list!!
 

Japan's Noda: watching forex market closely - Reuters
29 Jul 2010 at 11:04pm

Japan's Noda: watching forex market closely
Reuters
TOKYO July 30 (Reuters) - Japanese Finance Minister Yoshihiko Noda said on Friday that he was closely watching the foreign exchange market, when asked about ...
Japan's Ikeda frets about strong yenReuters

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WORLD FOREX: Dollar Up Vs Euro, Down Vs Yen After US GDP Report - Wall Street...
30 Jul 2010 at 3:51pm

Moneycontrol.com
WORLD FOREX: Dollar Up Vs Euro, Down Vs Yen After US GDP Report
Wall Street Journal
"The market is getting increasingly concerned with the health of the US economy," said Steve Butler, director of foreign exchange at Scotia Capital in ...
WORLD FOREX: UK Pound Hits 5-Month High In Unsettled TradingWall Street Journal
FOREX-Dollar fal...
 
Basics of Forex Currency Rates - Forex Rate It! (blog)
31 Jul 2010 at 2:49am

Basics of Forex Currency Rates
Forex Rate It! (blog)
The forex market is the world's largest financial market. It is, basically, the hub where forex currency rates are set. The forex currency rate is also ...

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