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How Does Forex Work?

Foreign Exchange Market (Forex, Or FX, Market)

Forex (Foreign Exchange market) – the world’s largest financial market, where different currencies are exchanged against each other. This swap is usually expressed in pips or fractions of pips, and it is typically charged by forex forward market makers operating in the over the counter or OTC market for you to swap out a position from value tomorrow or tom until the next trading day, which will then be spot.

Foreign currencies can be transacted on a ‘spot’ basis for immediate delivery (see SPOT MARKET ) or can be bought and sold for future delivery (see FUTURES MARKET ). Some two-thirds of London’s foreign exchange dealings in 2004 were spot transactions.

To help limit your trading losses and ensure that your losses never exceed your account balance, our systems monitor your margin in near real-time and will automatically close out your open positions if your account equity falls below the 100% margin requirement.

If you believe the GBPUSD forex pair is going to go higher then you will be looking to buy British Pounds (GBP) whilst simultaneously selling US Dollars (USD) to do so. Of course your broker does all this for you, you just pick the direction and the state of the art broker technology does the rest.

Foreign exchange derivatives, including both traditional and non-traditional products, are an important tool for many Australian companies with foreign currency exposures, because they can be used to provide protection against adverse exchange rate movements.

Foreign exchange market activity became increasingly concentrated in the major hubs, with the top five centers of Britain (mostly London), the United States (mostly New York), Tokyo, Hong Kong and Singapore rising to 77 percent from 75 percent three years ago.

By making use of that leverage as a trader you are going to be able to place trades that are worth up to a maximum of 200 hundreds times the amount you have available in your trading account, and as such your are going to be getting something of a much more fluid trading account balance when making use of leverage.