| There's a 3-part answer to this. Here is the first part: | | | | To our friends who are trading stocks: "Can you |
| Foreign Exchange is the buying of one currency and | | | | trade the same stock 24 hrs a day?" |
| selling of another simultaneously. Currencies are | | | | No. You can only trade during the opening hours of |
| generally traded through a broker or dealer and are | | | | that country. |
| executed in currency pairs. | | | | Forex, as you know now, is 24 hours. 24 HOURS! |
| Now that is a lot of words, so let me break this | | | | At night 3 a.m., after you have finished watching |
| down for you. | | | | your Bollywood movie, nothing to do? Go online, the |
| If I show you: | | | | Forex market is open for you. |
| USD = 1it means nothing in Forex. It's just an | | | | Now, when I say the lack of a physical exchange, |
| absolute figure - 1 dollar. But if I'm going to do this | | | | Forex is considered an OTC market. OTC stands for |
| USD/SGD = 1.51now it tells us something -> US dollar | | | | Over-The-Counter market. There is no single physical |
| vs SG dollar equals 1.51 | | | | location that you go to trade Forex. |
| Notice now, whenever it's executed in currency pairs, | | | | It's always traded electronically world-wide, through a |
| the base value for the left hand currency is always | | | | network of banks, investment houses, hedge-fund |
| numeric 1. No exception. | | | | houses, central banks, institutions, etc. They all are |
| Forex is always traded in currency pairs, so that we | | | | linked electronically. |
| can see the relative strength of one currency over | | | | What about chief financial centres? What are they? |
| another. | | | | They are where most instituitions park their volumes |
| Sometimes we hear our friends say, "Oh the US | | | | of money. |
| dollar is dropping ah..." | | | | General knowledge time: Where do you think are the |
| Don't do that. Dropping in terms of what? What does | | | | largest financial centres in the world? |
| it mean? | | | | Want to make a guess? Here are the rankings |
| When you say one is weak or strong, it is | | | | 1. London |
| comparative to another currency. That is the only | | | | 2. New York |
| reason why we are trading Forex in currency pairs. | | | | 3. Tokyo |
| Moving on... | | | | Guess which city is the 4th largest financial centre? |
| Forex is the principal monetary market in the world | | | | It's Singapore. |
| with a volume in excess of USD 3.5 trillion dollars daily. | | | | Yes, SINGAPORE is officially the 4th largest financial |
| We are talking about the LARGEST financial market | | | | centre in the world, where Forex transactions take |
| in the world. All your stocks, your unit trusts, your | | | | part. If you live in Singapore, don't you think it's an |
| bonds, your futures, your forwards, your derivatives, | | | | excellent opportunity for you? |
| your commodities, your ETFs, your CFDs... They all | | | | So now, how is it that the Forex market is open 24 |
| formed a portion of this behemoth market. | | | | hrs worldwide? The picture below might help you. |
| How much is one trillion dollars? How many zeros? | | | | The Forex market is open 24 hours a day. |
| It's 12 zeros. $1,000,000,000,000. | | | | Broadly speaking, I'll split the whole world up into 3 |
| To give you a perspective of how much one trillion | | | | major regions. |
| dollars is, let's do a small exercise. | | | | The first major region is called Oceania/Asia. Oceania |
| If I were to pay you $1,000, not every day, not | | | | is Australia, New Zealand, and the cluster of Pacific |
| every hour, not even every minute, but every | | | | Islands. |
| second, | | | | The second region is Europe, and the third region is |
| $1,000 | | | | the U.S. |
| $1,000 | | | | Now you will notice this. When I say a region is open, |
| $1,000 | | | | it's when the sun rises in that region and they start |
| $1,000 | | | | conducting business. |
| Give me a wild guess. How long will it take me to pay | | | | When Asia closes, that's roughly when Europe starts |
| you one trillion dollars? | | | | opening. Similarly, when Europe closes, that's roughly |
| 1 month? 1 year? 5 years? | | | | when the US opens. |
| The answer is... (drumroll please...) | | | | This diagram is from 6am to 6am - 24 hours. You will |
| 32 YEARS. | | | | see an overlap between the regions, meaning at any |
| And that is still only one third of the forex market. | | | | point of time, at least one region is open for you to |
| That's the perspective here. | | | | trade Forex. |
| Is it so difficult for us to be plugging from it $200 to | | | | So, in summary: |
| $300 in a single day? Not difficult, if we know how. | | | | * Forex is the buying and selling of currency pairs. |
| Moving on... | | | | * It is the largest financial market in the world. |
| The lack of a physical exchange allows the Forex | | | | * You can trade Forex anywhere in the world, at |
| market to conduct business on a 24 hr time frame | | | | anytime of the day. |
| across the chief financial centres. | | | | |