The word "Forex" is derived from the contraction of the English terms Foreign Exchange. It is the currency exchange market where convertible currencies are traded against one another at constantly fluctuating exchange rates. This global market is the second-largest financial market in the world by total volume, after the interest rate market. However, it is the most concentrated and ranks first in liquidity for the most traded products, such as the EUR/USD pair.
According to the latest BIS report from 2011, trading in the foreign exchange market has increased by 20% since 2007, reaching $3.981 trillion. The United Kingdom and the United States dominate the market, with London accounting for over 36.7% and the US for 17.9% of total trades. France lags far behind, with only 3% of global exchanges, a significant decline since 1995.
The vast majority of Forex transactions are speculative (lasting no more than seven days) rather than commercial. Since the 2000s, with the implementation of the MiFID directive, all investors—both retail and institutional—can now trade on the Forex market in smaller amounts via brokers.
The Forex market is open 24 hours a day. Major stock exchanges around the world take turns (London, New York, Sydney, Tokyo), ensuring no interruptions for traders except during weekends.
Forex trading is not conducted on a centralized market but through an interbank market.
One of the key characteristics of Forex trading is the significant leverage effect offered by brokers. Leverage allows traders to control a sum up to 100 times greater than their actual capital.
The central bank of one (or several) countries is an institution entrusted by the state (or a group of states, as in the Eurozone) to decide and implement monetary policy.
A bank is a business that deals in money. It can serve clients in various ways: receiving and holding funds, offering investment options (savings), providing payment and exchange methods (checks, credit cards, etc.), lending money, and generally performing all financial services. Banks also trade and operate in financial markets either on their own behalf or for their clients.
A significant number of financial market transactions are made by businesses involved in importing or exporting various products. These businesses need to buy the currencies of different countries where their international partners are located.
The primary goal of various funds (investment, pension, insurance, hedge funds) is to generate profits. These funds manage large amounts of capital, meaning their Forex operations are substantial and can impact currency values.
These are non-banking institutions offering clients the opportunity to trade on financial markets with small amounts of their own capital. In addition to trading in Forex, these firms may also facilitate trading in CFD (Contracts for Difference) markets. Trading through trading centers is typically done with trading software such as MetaTrader from TeleTrade-TBI Tunisia.
With a good trading strategy and proper capital management rules, traders can achieve average returns of 2-5% up to 80-100% per month. This variation depends on the trader's system and market conditions.
Strong and predictable currency movements can occur with varying regularity. This includes:
Profitability is strongly tied to the size of the trader's deposit. Smaller accounts require cautious trading tactics, potentially missing out on many profitable opportunities. Larger accounts allow for more reliable trades with higher potential gains.
Profitability depends on the level of risk the trader is willing to accept. Restrictions are often imposed based on the size of the account and the trader's personal financial situation. For investor accounts, restrictions are typically set by the investor.