What is Traded on Forex Currency Exchange Market & How the System Works

By Arman Logan

As you probably know, forex means foreign currency exchange. Well, that's pretty basic and everyone knows about. However, do you know how you actually trade on forex, and how the whole system works? I am sure, you said no. So in this article, I will explain you what is basically traded on forex and traders make money there.

The short answer to what is traded on forex is money. Basically, what you do in forex you simultaneously buy one currency while selling another one. You trade currencies through a broker or dealer, and currencies are always traded in pairs, such as US dollar with Euro (USD/EUR) or Canadian dollar with GB pound (CAN/GBP), etc.

What confuses some people, that you not buying something that actually exist. For beginners, this might a problem, but you easily get used it. Buying a currency is like, if you would buy shares of some company, which would mean some percentage of the company belongs to you. You see, when you are buying a specific currency, let's US dollar, you are buying a particular share of US economy, and that affects the whole forex market and country's economy.

Compared to other financial markets, like New York Stock Exchange, forex doesn't have any location or exchange centre, which means that forex market is Over-the-Counter or Interbank market. Sounds a bit complicated, but those terms just mean that forex is electronic market and it runs on network of banks everyday, 24 hours.

Some time ago, in 1990, only "the big guys", who had millions could trade forex, because the requirement for trading was an investment of about 10-50 million dollars to start. Forex was originally created to be traded by people who have serious money and bankers. But now, with the born of Internet and new technologies, forex is trading is available to any person and you can get started even today.

All you need to start trading is a computer, reliable Internet connection and a forex account.

4 years ago, professional forex traders have developed advanced trading software called Forex Funnel They have been testing the tool until today privately, and managed to earn over $400000 in profit. If you want to know how they did it, click here to learn more about Forex Funnel.