If you have traveled internationally, you probably are well aware of 1 the foreign exchange market, often called the forex or FX market. When you converted U.S. dollars into euros or yen or vice versa at a bank or currency exchange, you may have noticed big differences in the buying power of your currency, depending on when and where you you made the transactions. Although you may have noted the impact on your pocketbook, you may not have realized that you were also participating in the largest market in the world. The forex market trades an estimated $1.5 to $2.5 trillion a day. No one really knows what the actual figure is because there is no central marketplace for keeping tabs on all of the forex transactions around the world. The forex market is massive, dwarfing the $30 billion a day traded at the New York Stock Exchange. In fact, forex trading exceeds the combined volume of all the major exchanges trading equities, futures, and other instruments around the globe.
Although professional traders implementing sophisticated strategies account for most of the trading in the huge forex market, participation by individual traders has grown tremendously in recent years with the proliferation of the Internet, enhancements in personalers and trading software, the launch of dozens of cash forex firms taking advantage of online trading, and the globalization of markets in general. The introduction of the euro on January 1, 1999, and the weakness of the U.S. dollar after peaking in 2001 also contributed to the surge of interest in forex trading. Increased numbers of individual traders became aware of the role of forex in global markets with an eye toward profiting as currency trends unfolded. More international trade, reduced government regulation, expansion of democracy worldwide, the increase in private ownership and free enterprise concepts, and a greater acceptance of free-market trading principles should keep the forex market at the forefront of tradersí attention for many years to come.