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What is a Foreign Exchange Market (FOREX)?
FOREX is where currencies are traded on. Currencies, as you and I know currency is the paper cash that you and I trade for to get and buy a physical product. These currencies can be anything. It can be Euro, Sterling, Pound and/or the Japanese Yen. Any types of currencies are usually traded in pairs. S usually when you look at any symbols, you usually see 2 of them. We will talk much more of that later on.
These currencies are traded in an unregulated Market. What does that mean?
Unlike the stock exchange today, which is traded through a regulated body (one central body), these are done through different banks through different data feeds. The prices that you have my differ from broker to broker. This is what it means by unregulated.
Some of you might be wondering if you have traded in this FOREX or not. I can guarantee you that almost all of us or 99.9% of us have traded in this FOREX. It is because all of us or probably most of us have gone on holidays. When you go for Holidays, what naturally happens is that you exchange our home currency for the foreign currency. This is so that you can spend in the country that you are going for on Holiday.
Market size and Liquidity of the FOREX.
FOREX is the largest financial market compared to all the other Markets. If you look and compare the daily turnover of the FOREX and compare with the commodities and stocks, FOREX will be the biggest one. Guess what! The daily turnover of the FOREX is 5.28 trillion. A trillion is 1000 Billion. Can you imagine how much money that is. That is the amount that is being traded every single day in this massive market.
Price Increment (PI) of the FOREX.
As mentioned before, in the usual economic transactions that we do out there is 0.01. That is what, in UK, this is what we call a penny. It means the smallest price increment that anything can have in the external common transaction in the world that we do, is by 0.01. In the US, we call it cents and for different market, we have different terminologies. The price is always two decimal points.
In the FOREX, the smallest price increment is four decimal points (0.0001). That is the smallest it can move by. The terminology that we give to that is called a Pip (Percentage in Points). The smallest price increment in the Foreign Exchange Market.
Now we can move on to the next video, which is the next Market since we have covered what is the Foreign Exchange Market, the market Size and Liquidity, and also the price increment.
We shall now move on to the next Market, which is the Crypto Market