What is Forex?

The forex (short for English foreign exchange) or foreign exchange market is a currency market across the world. It is decentralized and accessible to all: when a tourist in Tokyo buying dollars with yen, it performs a transaction on the forex market - like when a multinational converts million pounds sterling. This makes it the largest market in the world, made volatile by the large volume of transactions and is also open at all times, except on weekends.

Many clients seek only to forex exchange foreign currency against theirs, as companies needing to pay wages other than where they sell. But a large part consists of currency dealers who speculate on movements in exchange rates - in the manner of those who are on the evolution of stock prices.

Exchange rates fluctuate due to macroeconomic developments and events and expectations that traders have, in addition to actual cash flows. This market attracts investors because volatility has many opportunities for profit (and loss, of course), while allowing the use of hedging instruments well known. Another of its advantages is that the forex broker allows the use of leverage by their investors requiring only low margins.

On the forex market, currencies are traded against each other with "pairs", which represent the relative value of a unit of currency, the "base" against another currency, the "cons". They are usually written by juxtaposing the international three-letter codes for currencies, from the bottom up, for example, EUR / USD is the ratio of the euro against the U.S. dollar.

As in all markets, there is a difference between the purchase price and selling on forex, called gap between demand and supply. It is measured in "pips", the smallest difference in price a given exchange rate can offer - and usually equal to one hundredth of a percent. For major currencies, the difference between the price at which a market player will buy ("application") to a customer and one he will sell ("Offer") is often between one and three pips.

The market is divided into three access levels: at the top is the interbank market, including the largest banks and securities dealers, who generally perceive sharp differences. Smaller banks and large multinationals come after, followed by pension funds and asset managers. The traders, who bring up the rear, participate indirectly through brokers or banks, and are part of a growing market through the facilities offered by the Internet.