What it means
Forex is the largest market in the world and trades over the counter, 24 hours a day from Sunday evening to Friday evening New York time. It is busiest when London and New York overlap.
In practice
Forex traders speculate on one currency rising against another, mostly through a broker on margin. The market follows the sun: Asia opens the day, London takes over, then New York, with the biggest moves usually coming in the London and New York hours.
Interest rate expectations drive currencies more than anything else, so central bank meetings and inflation and jobs reports are the key dates. Between them, pairs often trade in ranges that technical levels describe well.
What to watch for
There is no central exchange, so there is no single official price or volume, and quotes differ slightly from broker to broker. Spreads widen around news and at the daily rollover, which can trigger stops that the chart at another broker never reached.
Related terms
5 terms- Currency pairTwo currencies quoted against each other; the price shows how much of the second buys one of the first.
- PipThe standard unit of forex movement: 0.0001 for most pairs, 0.01 for yen pairs.
- LotA forex position size unit: standard 100,000, mini 10,000, micro 1,000 units.
- OTCTrading directly between parties through dealers, with no single central exchange.
- SwapInterest charged or paid for holding a forex or CFD position past the daily rollover at 5 pm New York.