Forex Tutorial - A Short Introduction To FOREX

FOREX is the world’s largest and most liquid trading market. Many consider FOREX as the best home business you can ever venture in. Even though regular people have had the opportunity to take part in trading foreign currencies for profit (in the same way banks and large corporations do) since 1998, it is just now becoming the cool, hip, new "thing" to talk about at parties, business events, and other social gatherings.

Even though it has been somewhat of a loosely guarded secret, every day more and more investors are turning to the all-electronic world of FOREX trading for income and profit because of its numerous benefits & advantages over traditional trading vehicles, like stocks, bonds and commodities.

But, still, whenever something seems new or is just becoming a part of social conversation, news articles, and water cooler gossip, misconceptions have to be overcome, the mind has to be open and the slate has to be clear for starting out fresh with the CORRECT information.

So, in this article, it is my attempt to give you some solid, but not over-detailed, information on just what the heck "FX" (FOREX) means, what it is, and why it exists.

As a successful trader said, Trading FOREX is like picking money up off the floor.Not trading FOREX is like leaving it there for someone else to pick up." Others in the industry have also said, Trading FOREX is like having an ATM machine on your own computer.

Here's an explanation (one I feel you'll appreciate) of what FOREX is and how a bunch of traders, profit from it:

The Foreign Exchange Market, also referred to the "FOREX" or "FX" market, is the spot (cash) market for currency.

But, don't mistake FX as trading the futures market, where you buy a contract to purchase a particular currency at a future price in time.

What FX traders do is much less risky than trading currencies on the futures market, much more profitable, and a lot easier, than trading stocks.

So, you're probably wondering where it's at ... or ... how to access the FX market?

The answer is: FX Trading is not bound to any one trading floor and is not centralized on an exchange, as with the stock and futures markets. The FX market is considered an Over-the- Counter (OTC) or 'Interbank' market, due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period.

Yes, if that's the first time you've heard about an all-electronic market, I know this may sound somewhat intriguing to you.

Here's what you are actually trading when you participate in the Foreign Exchange (FOREX) market:

Essentially, like the large banks who use the FX market to protect themselves from the fluctuating exchange rate of different currencies, as an investor, what a FX trader is doing is simultaneously exchanging one countries currency for another. So, in actuality, they're electronically trading a currency-pair and the price that is quoted to us is the exchange rate between the two currencies.

In other words, simply the quoted price is how many of the one currency is worth 1 of the other currency.

Example:

EUR/USD last trade 1.2850 - One Euro is worth $1.2850 US dollars.The first currency (in this example, the EURO) is referred to as the base currency and the second (/USD) as the counter or quote currency.

The FOREX has a DAILY trading volume of around $1.5 trillion dollars - 30 times larger than the combined volume of all U.S. equity markets. This means that 1,498,574 skilled traders could each take 1 million dollars out of the FOREX market every day and the FOREX would still have more money left than the New York Stock exchange every day!

The FOREX plays a vital role in the world economy and there will always be a tremendous need for the FOREX. International trade increases as technology and communication increases. As long as there is international trade, there will be a FOREX market. The FX market has to exist so a country like Japan can sell products in the United States and be able to receive Japanese Yen in exchange for US Dollar.

There's plenty of money to be made using FOREX for plenty of traders that use the right trading techniques / tactics that will allow them to profit immensely. And, with only 5% of the daily turnover of volume coming from banks, government and large corporations who need to hedge, the other 95% is for speculation and profit.

About The Author : Adrian Pablo : Forex trader and freelance writer. http://www.1-forex.com

China Considering Using Forex Reserves

A senior official in the Chinese Communist Party is advising the government to use some of its forex exchange reserves to buy overseas energy and mining assets while the international oil prices are fluctuating so badly. According to Li Lianzhong, the head of the economic department in the Policy Research Office, “The value of China’s foreign exchange reserves has shrunk badly because of US dollar depreciation and in the meantime spending lots of dollars purchasing crude oil at very high prices. We should encourage our companies to purchase overseas mines and oil fields, changing foreign exchange reserves into resources reserves.”

China, like many other countries worldwide, is feeling the stress of the unstable international economy. Lianzhong feels that by converting their assests will help China’s stable economic growth remain stable and give the yuan exchange rate more flexibility. Two-thirds to three-quarters of the reserve pile is believed to be wrapped up American dollar assets with the majority of it being in government or quasi-governmnet debt.

American Dollar Eases

The dollar has eased a bit among fears that the economy’s unstable condition will last longer and exert more pressure on the public before stabling. If this is the case, it will limit the Federal Reserve’s ability to raise the interest rates by the end of 2008 as originally predicted. Merrill Lynch reminded investors that the credit squeeze was not over yet and that the Lehman Brothers Holdings Inc. could very well post a loss and take an additional $2.5 billion write-down on home loans. Already two banks in the United States were seized by regulators.

However, there are some pundits that see the economic growth in the United States picking up steam and speed. Comments have been made that indicate the credit crunch’s deterioration is more of a reality that the increased inflation, both of which are affecting the other and making the American economy more unstable than it should be.

Dollar Holding While Oil Dropping

Anyone filling their tank on Tuesday may have noticed the lower gas prices. The steep drop in oil prices, bringing the cost of gasoline under $4.00 per gallon in some places, helped the dollar rally a bit more on the international trading market. Comments by U.S. Treasury Secretary Henry Paulson also helped. Paulson reiterated that a strong dollar was in the best interest of all Americans and nations that supported it.

Wachovia, a major financial institution in the United States, reported weak results earlier in the week and the comments by Paulson and Charles Plosser, the Philadelphia Federal Reserve President, seemed to overshadow the negative results Wachovia reported. The comments and the oil drop seemed to help the dollar gain more support. Plosser commented that the rising inflation could force the Fed to raise interest rates. His comments were meant to help the economy bounce back and stabilize so that such drastic measures would not have to be taken.

Forex Currency As Payment

The residents of Beitbridge, Zimbabwe, seem to be taking the current Forex frenzy a bit too far, jumping on the foreign currency exchange bandwagon with gusto. Instead of requesting payment for services and products in the Zimbabwean dollar, the currency of the country, they are opting for payment in the South African rand instead. The rand is returning so much more on the Zimbabwean dollar, a sign of ‘galloping inflation’ in the country, that people are cashing in on simply to make ends meet. The border town’s merchants have all been switching currency, some of them with very good reason.

According to an employee in one of Beitbridge’s supermarkets, the prices of goods that are being imported to the town from South Africa are rising. “You will realise that most of our goods are imported from South Africa and therefore you will find that of late we have been increasing the prices almost everyday. This is largely because we would be racing against the prevailing exchange rate to enable ourselves to purchase more supplies,” said the employee.

Flea markets and traders have also started trading in foreign currency to keep their prices at a reasonable level. One example that has been given is the price of a pair of trousers at a flea market. In rand, they are going for 150 to 250 while at the retail clothing stores they are selling for $3 to $5 trillion Zimbabwe dollars.

Even landlord are starting to charge their tenants rent in foreign currency, which has forced many people to move out of their lodgings or be evicted because they could not pay the rent in the new rate. People in high-density suburbs are paying R300 per room while low-density suburbs are paying between R600 and R1000 per room.

“In essence, it seems the use of foreign currency in Beitbridge whenever conducting any business has been legalised and right now you will note that some landlords who only recently feared arrest for charging rent in foreign currency are now openly boasting about it and are not being arrested for that matter. I feel something has to be done before the situation totally gets out of control,” complained Ms Teldah Sigogo, a resident of Dulibadzimu where the rent situation is spiralling out of control.

Technically, the residents of Beitbridge are breaking the law and could be forced to serve jail time for charging foreign currency rates for goods and services. It is an illegal practice under Zimbabwean law. It is understandable, however, why this is happening as the inflation rates continue to rise. Business owners have no other option besides simply closing up shop, and that would only lead to further decline in the economy.

Why did FOREX create expressFX?

expressFX has the same philosophy behind as Apple IPod. They both feature simplicity, an intuitive interface and they have both revolutionized the way people listen to music and trade Forex.

expressFX features zero spreads and zero commissions on non-profitable trades. This means that you pay commissions to your broker only if you make profits from your trades.

expressFX is not just a new way to trade Forex; it is a groundbreaking approach to trading.
Forex Trading Redefined

• Zero Spread trading
• Automatic commission-refunds on non-profitable trades
• Built-in wizard that teaches you how to make trades, limit losses and take profits.

Experience the power of expressFX with a free demo account

Forex Trading Systems & Forex Training

To be a successful forex trader it is vital that you have proper forex training a strong forex trading system. Your system and strategy for trading is your road map to profits*.

Pro Financial FX is affiliated with 4xIsland, the leader in forex education and forex trading systems. 4xIsland offers several unique forex training packages and strategies with full online support, easy to follow training videos and online coaching with professional trader Richard Ottley. Richard Ottley has developed two successful trading strategies and systems: the On Target Trading System and the Premier Trading System. Discover how a trading system can earn you exponential profits in the forex*.

Get Started today by speaking with a Forex Consultant at 1-800-557-9776

Free Forex Training

The best things in life are free. Pro Financial FX is happy to provide free forex training on our website. Please check back often as we share trading ideas, forex trading systems, and forex market commentary to help you become a better forex trader. Of course our ultimately goal is for you to become a client of ours either as through our forex training products and coaching or as a managed forex account participant. Until, enjoy some free forex training information and sign up for our next online forex webinar.

Live Webinar Events

Get educated on how to participate in the largest market in the world now totaling over $3.2 Trillion a day. Pro Financial FX offers an array of live online webinars to help educate you on the power of currency investing. Whether you want to explore the opportunities of trading yourself or you would rather have a professional managed your funds for you, you have come to the right place.

From the page of forex.com

Our Mission is to be your premier source for all things forex

At FOREX.com, advanced trading tools, 24-hour customer support, and a secure online trading experience are all part of our commitment to offer more to the individual investor.

FOREX.com is a division of GAIN Capital Group, LLC, one of the most respected online forex trading firms in the industry. The company's flagship service, GAIN Capital, is used by institutional investors, professional money managers and experienced day traders from over 140 countries. GAIN Capital Group is pleased to offer individual investors access to its award-winning trading platform and professional-level services via FOREX.com.

FOREX.com is a registered Futures Commission Merchant (NFA ID #0339826) and a member of the National Futures Association. As an FCM, FOREX.com is regulated by the Commodity Futures Trading Commission (CFTC), must uphold the highest standards and business practices and is subject to strict financial requirements and reporting.


For feed backs their e-mail address is info@forex.com

Forex Strategy Builder is Free forex software

How about making better investments on the Forex market?

What would you say if you could test your trading strategies using real market data dating back to 199...? Forex Strategy Builder gives you this opportunity for Free.

What would it be like if you could see how your strategy would actually work on the market and what profit or loss it would have made, had you used it in the previous months (including your broker's fees)? No task is easier for Forex Strategy Builder.
Make reliable back test of your trading systems!

It is possible a trading system to show excellent results in the historical test and after that to lead to a catastrophic outcome. Some reasons could be faulty back test, over-optimization or tricky indicators. Forex Strategy Builder can help you in this situation. It easily recognizes the pitfalls of testing Forex trading systems. It notices all ambiguous bars in the back test. The program can find the average balance line between all possible market scenarios. It also has techniques for recognizing the curve fitting.
Constant improvement

It is advantageous that Forex Strategy Builder is being continually updated and you can partake in its shaping in the way you prefer. So, feel free to share with us the things you believe can be improved. Be certain that we will follow your recommendations in the next versions. This program aims at making the process of creating profitable strategies, based on technical analysis, an easier task.

While you are not on the real market, do not hesitate to test all strategies or combinations of technical indicators you can think of. You will gain more experience and understanding of how the different logics and parameters influence the foreign exchange trading.
It is realy free forex software

This forex software is absolutely free. It is not necessary to pay money or to make any registration. You can start testing your trading system with historical market data right now.

Step into the world of Forex Strategy Builder. It is 100% Free forex software.
Visit our forex download page. You can find installation hints, download links, system requirements and other useful information there.


Forex Strategy Builder v2.6.1.3 (free download):-
http://forexsb.com/downloads/ForexStrategyBuilder.exe

For more info on this just go here http://forexsb.com

Futures exchange

A futures exchange is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future.

Though the origins of futures trading can supposedly be traced to Ancient Greek or Phoenician times,[citation needed] the first modern organized futures exchange began in 1710 at the Dojima Rice Exchange in Osaka, Japan.
The United States followed in the early 1800s. Chicago is located at the base of the Great Lakes, close to the farmlands and cattle country of the U.S. Midwest, making it a natural center for transportation, distribution and trading of agricultural produce. Gluts and shortages of these products caused chaotic fluctuations in price, and this led to the development of a market enabling grain merchants, processors, and agriculture companies to trade in "to arrive" or "cash forward" contracts to insulate them from the risk of adverse price change and enable them to hedge.
Forward contracts were standard at the time. However, most forward contracts weren't honored by both the buyer and the seller. For instance, if the buyer of a corn forward contract made an agreement to buy corn, and at the time of delivery the price of corn differed dramatically from the original contract price, either the buyer or the seller would back out. Additionally, the forward contracts market was very illiquid and an exchange was needed that would bring together a market to find potential buyers and sellers of a commodity instead of making people bear the burden of finding a buyer or seller.
In 1848, the Chicago Board of Trade (CBOT – the world's first modern futures exchange) was formed. Trading was originally in forward contracts; the first contract (on corn) was written on March 13, 1851. In 1865, standardized futures contracts were introduced.
The Chicago Produce Exchange was established in 1874 and renamed the Chicago Mercantile Exchange (CME) in 1898 and reorganised in the 1919. In 1972 the International Monetary Market (IMM), a division of the CME, was formed to offer futures contracts in foreign currencies: British pound, Canadian dollar, German mark, Japanese yen, Mexican peso, and Swiss franc.
In 1881, a regional market was founded in Minneapolis, Minnesota and in 1883 introduced futures for the first time. Trading continuously since then, today the Minneapolis Grain Exchange (MGEX) is the only exchange for hard red spring wheat futures and options.
Later in the 1970s saw the development of the financial futures contracts, which allowed trading in the future value of interest rates. These (in particular the 90-day Eurodollar contract introduced in 1981) had an enormous impact on the development of the interest rate swap market.
Today, the futures markets have far outgrown their agricultural origins. With the addition of the New York Mercantile Exchange (NYMEX) the trading and hedging of financial products using futures dwarfs the traditional commodity markets, and plays a major role in the global financial system, trading over 1.5 trillion U.S. dollars per day in 2005.
The recent history of these exchanges (Aug 2006) finds the Chicago Exchange trading more than 70% of its Futures contracts on its "Globex" trading platform and this trend is rising daily. It counts for over 45.5 Billion dollars of nominal trade (over 1 million contracts) every single day in "electronic trading" as opposed to open outcry trading of Futures, Options and Derivatives.
In June of 2001, ICE (IntercontinentalExchange) acquired the International Petroleum Exchange (IPE), now ICE Futures, which operated Europe’s leading open-outcry energy futures exchange. Since 2003, ICE has partnered with the Chicago Climate Exchange (CCX) to host its electronic marketplace. In April of 2005, the entire ICE portfolio of energy futures became fully electronic.
In 2006, the New York Stock Exchange teamed up with the Amsterdam-Brussels-Lisbon-Paris Exchanges "Euronext" electronic exchange to form the first trans-continental Futures and Options Exchange. These two developments as well as the sharp growth of internet Futures trading platforms developed by a number of trading companies clearly points to a race to total internet trading of Futures and Options in the coming years.

Retail forex

The retail forex (retail currency trading or retail FX) market is a subset of the larger foreign exchange market. This "market has long been plagued by swindlers preying on the gullible," according to The New York Times[1]. It's commonly thought that about 90% of all retail FX traders lose money.

While forex has been traded since the beginning of financial markets, on-line retail trading has only been active since about 1996 . From the 1970s, larger retail traders could trade FX contracts at the Chicago Mercantile Exchange.[1]
By 1996 on-line retail forex trading became practical. Internet-based market makers would take the opposite side of retail trader’s trades. These companies also created online trading platforms that provided a quick way for individuals to buy and sell on the forex spot market.
In online currency exchange, few or no transactions actually lead to physical delivery to the client; all positions will eventually be closed. The market makers offer high amounts of leverage. While up to 4:1 leverage is available in equities and 20:1 in Futures, it is common to have 100:1 leverage in currencies.]].[1] In the typical 100:1 scenario, the client absorbs all risks associated with controlling a position worth 100 times his capital.
Currencies are quoted in pairs i.e. EURUSD (euro vs. United States dollar). These are often incorrectly quoted with a "/" between them. In fact if the "/" is present the currency order should be reversed - the "/" signifying arithmetic division. The pair should be quoted EURUSD or USD/EUR. This then gives the correct exchange rate. e.g. if you had to pay $135,000 for €100,000 135000/100000 = 1.35 (the exchange rate).

Working capital

Working capital (also known as net working capital) is a financial metric which represents the amount of day-by-day operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities. A company can be endowed with assets and profitability, but short of liquidity, if these assets cannot readily be converted into cash.

When current assets are less than current liabilities, an entity has a working capital deficiency also called a working capital deficit.

Current assets and current liabilities include three accounts which are of special importance. These accounts represent the areas of the business where managers have the most direct impact:
accounts receivable (current asset)
inventory (current assets), and
accounts payable (current liability)
The current portion of debt (payable within 12 months) is critical, because it represents a short-term claim to current assets and is often secured by long term assets. Common types of short-term debt are bank loans and lines of credit.
An increase in working capital indicates that the business has either increased current assets (that is received cash, or other current assets) or has decreased current liabilities, for example has paid off some short-term creditors.
Implications on M&A: The common commercial definition of working capital for the purpose of a working capital adjustment in an M&A transaction (ie for a working capital adjustment mechanism in a sale and purchase agreement) is equal to:
Current Assets - Current Liabilities excluding deferred tax assets/liabilities, excess cash, surplus assets and/or deposit balances.
Cash balance items often attract a one-for-one purchase price adjustment.

Employment contract

A contract of employment is a category of contract used in labour law to attribute right and responsibilities between parties to a bargain. On the one end stands an "employee" who is "employed" by an "employer". It has arisen out of the old master-servant law, used before the 20th century. Put generally, the contract of employment denotes a relationship of economic dependence and social subordination. In the words of the influential labour lawyer Sir Otto Kahn-Freund,
"the relation between an employer and an isolated employee or worker is typically a relation between a bearer of power and one who is not a bearer of power. In its inception it is an act of submission, in its operation it is a condition of subordination, however much the submission and the subordination may be concealed by the indispensable figment of the legal mind known as the 'contract of employment'. The main object of labour law has been, and I venture to say will always be a countervailing force to counteract the inequality of bargaining power which is inherent and must be inherent in the employment relationship.

A contract of employment is usually defined to mean the same as a "contract of service".[2] A contract of service has historically been distinguished from a "contract for services", the expression altered to imply the dividing line between a person who is "employed" and someone who is "self employed". The purpose of the dividing line is to attribute rights to some kinds of people who work from others. This could be the right to a minimum wage, holiday pay, sick leave, fair dismissal, a written statement of the contract, the right to organise in a union, and so on. The assumption is that genuinely self employed people should be able to look after their own affairs, and therefore work they do for others should not carry with it an obligation to look after these rights.
In Roman law the equivalent dichotomy was that between locatio conductio operarum and locatio conductio operis (lit. hire of services and of service).[3]
The terminology is complicated by the use of many other sorts of contracts involving one person doing work for another. Instead of being considered and "employee", the individual could be considered a "worker" (which could mean less employment legislation protection) or as having an "employment relationship" (which could mean protection somewhere in between) or a "professional" or a "dependent entrepreneur", and so on. Different countries will take more or less sophisticated, or complicated approaches to the question.

Balance of trade

The balance of trade (or net exports, sometimes symbolized as NX) is the difference between the monetary value of exports and imports in an economy over a certain period of time. A positive balance of trade is known as a trade surplus and consists of exporting more than is imported; a negative balance of trade is known as a trade deficit or, informally, a trade gap. The balance of trade is sometimes divided into a goods and a services balance; especially in the United Kingdom the terms visible and invisible balance are used.


The balance of trade forms part of the current account, which also includes other transactions such as income from the international investment position as well as international aid. If the current account is in surplus, the country's net international asset position increases correspondingly. Equally, a deficit decreases the net international asset position.
The trade balance is identical to the difference between a country's output and its domestic demand (the difference between what goods a country produces and how many goods it buys from abroad; this does not include money re-spent on foreign stocks, nor does it factor the concept of importing goods to produce for the domestic market).
Measuring the balance of payments can be problematic because of problems with recording and collecting data. As an illustration of this problem, when official data for all the world's countries are added up, exports exceed imports by a few percent; it appears the world is running a positive balance of trade with itself. This cannot be true, because all transactions involve an equal credit or debit in the account of each nation. The discrepancy is widely believed to be explained by transactions intended to launder money or evade taxes, smuggling and other visibility problems. However, especially for developed countries, accuracy is likely to be good.

Forex Trading Education Articles

Before you take a look at this website that I found, remember to keep an open mind and to not believe everything that you read. The site that I found has a decent list of articles that relate to forex trading education, and it is safe to say that most of the information is valid. However, in this game it is important to do extensive research so that you can make smart decisions with your money. Once you find that certain information is consistent, then you can start to put a little more faith into it.

Some of these articles break down forex trading to its basics, while others put more emphasis on certain parts of the game. For example, there are at least three articles that are considered "quick forex guides" while there are some other articles that explain specifics such as choosing a broker, swing trading strategies, mapping time frames, and more.

The articles located at this website are great for beginners who have not yet invested any money into the forex market, but would like to educate themselves first. Most veteran traders will already be familiar with the strategies presented in these articles but it still cannot hurt to take a look at them. Visit www.solerinvestments.com/Online-Trading/Currency-Trading-Education.htm and begin the learning process.

FOREX mini, research and quotes

A FOREX mini is simple a mini forex account specially designed for those new to online forex trading and also for those with small capitals of investment. Investors with less than US$5000 often prefer mini accounts. This amount can vary from broker to broker. Usually a mini forex account is called a e-mini and can be opened with US$ 500. Broking firms provide practice or demo accounts for their customers to get used to the excitement of forex trading without any cost involved inorder to test their trading skills and analyzing techniques.

A mini forex account can be opened at any time of the year. The trading size is small when compared to a regular trading account and is normally one tenth. Brokers do advice smaller lot sizes to reduce the risk associated with forex trading. Margins in trading are generally not less than 1% of the base currency, but brokers offer lower margins of US$ 50 per lot on some minis. Brokers calculate minis manually sometimes while some have softwares which calculate the margins automatically.

The main advantages a mini forex account provides is that with $500, a trader can withstand a huge swing in the market than a trader with a regular account. A FOREX mini helps immensely to spread the risks for a regular trader. A regular trader sometimes falls for a situation where margin call occurs, in which the balance falls below the minimum balance required. So to avoid this, many regular traders now open mini accounts to minimize their overall risk. Traders can compare mini accounts of different brokers and choose the best out of them. A mini account allows traders to focus on technical analysis rather than profit so that traders know when to exit and also make profit. Minis offer smaller contract size and also lower margin requirements.
Trading account being small, Orders by the client are placed within seconds. Brokers do take some amount of commission, but usually provide zero commission facility to woo their customers. Traders have to be careful with the kind of software used by the broking companies and have to see if they can provide live charts, real-time prices of all major currencies and others. Traders need to choose a base currency for their accounts and are generally USD or Euros. Traders can do trading 24 hours a day. Firms provide different kinds of tools to achieve success in mini forex trading.
FOREX research is also critical for brokerage firms. Research is extensively done to provide clients with updates and news, technical analysis and trust-worthy information. Intraday market news provides fresh news about the present market situation, events happening around the world, actions of financial buys and sells, political and economic issues in a major market which impact the currency rates and there by the forex trading. FOREX research is done by experienced and senior members of the firm and all the information is updated 20 times an hour. There are some issues which do not vary much in a day, so daily, weekly and even monthly research is done to keep abreast of the happenings for traders.
FOREX quotes are charts

Forex swap

In finance, a forex swap (or FX swap) is an over-the-counter short term interest rate derivative instrument. In emerging money markets, forex swaps are usually the first derivative instrument to be traded, ahead of forward rate agreements and before exotics.

A forex swap consists of two legs:
a spot foreign exchange transaction, and
a forward foreign exchange transaction.
These two legs are executed simultaneously for the same quantity, and therefore offset each other.

Forex swaps are used for hedging currency positions and for speculation.

Hedging
Investors use forex swaps to hedge their existing forex exposures by swapping temporary surplus funds in one currency into another currency for better use of liquidity. Doing so protects against adverse movements in the forex rate, but favourable moves are renounced.

Speculation
Investors use forex swaps to speculate on changes in the interest rate differentials between two currencies.

Foreign exchange option

In finance, a foreign exchange option (commonly shortened to just FX option or currency option) is a derivative financial instrument where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date.
The FX options market is the deepest, largest and most liquid market for options of any kind in the world. Most of the FX option volume is traded OTC and is lightly regulated, but a fraction is traded on exchanges like the Philadelphia Stock Exchange, or the Chicago Mercantile Exchange for options on futures contracts: the global market for exchange-traded currency options is notionally valued by the Bank for International Settlements at $158,300 million in 2005.Might be increased in the current days.

Financial Market

In economics, a financial market is a mechanism that allows people to easily buy and sell (trade) financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect the efficient market hypothesis.
Financial markets have evolved significantly over several hundred years and are undergoing constant innovation to improve liquidity.
Both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded) exist. Markets work by placing many interested buyers and sellers in one "place", thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy in contrast either to a command economy or to a non-market economy such as a gift economy.

The financial markets can be divided into different subtypes:
Capital markets which consist of:
Stock markets, which provide financing through the issuance of shares or common stock, and enable the subsequent trading thereof.
Bond markets, which provide financing through the issuance of Bonds, and enable the subsequent trading thereof.
Commodity markets, which facilitate the trading of commodities.
Money markets, which provide short term debt financing and investment.
Derivatives markets, which provide instruments for the management of financial risk.
Futures markets, which provide standardized forward contracts for trading products at some future date; see also forward market.
Insurance markets, which facilitate the redistribution of various risks.
Foreign exchange markets, which facilitate the trading of foreign exchange.

Financial markets in popular culture and Financial markets slang

Only negative stories about financial markets tend to make the news. The general perception, for those not involved in the world of financial markets is of a place full of crooks and con artists. Big stories like the Enron scandal serve to enhance this view.
Stories that make the headlines involve the incompetent, the lucky and the downright skillful. The Barings scandal is a classic story of incompetence mixed with greed leading to dire consequences. Another story of note is that of Black Wednesday, when sterling came under attack from hedge fund speculators. This led to major problems for the United Kingdom and had a serious impact on its course in Europe. A commonly recurring event is the stock market bubble, whereby market prices rise to dizzying heights in a so called exaggerated bull market. This is not a new phenomenon; indeed the story of Tulip mania in the Netherlands in the 17th century illustrates an early recorded example.
Financial markets are merely tools. Like all tools they have both beneficial and harmful uses. Overall, financial markets are used by honest people. Otherwise, people would turn away from them en masse. As in other walks of life, the financial markets have their fair share of rogue elements.

[edit] Financial markets slang
Big swinging dick, a highly successful financial markets trader. The term was made popular in the book Liar's Poker, by Michael Lewis
Geek, a Quant
Grim, an ageless man known for his whistle and tendency to relate current events to financial market[citation needed]
Nerd, a Quant
Quant, a quantitative analyst skilled in the black arts of PhD level (and above) mathematics and statistical methods
Rocket scientist, a financial consultant at the zenith of mathematical and computer programming skill. They are able to invent derivatives of frightening complexity and construct sophisticated pricing models. They generally handle the most advanced computing techniques adopted by the financial markets since the early 1980s. Typically, they are physicists and engineers by training; rocket scientists do not necessarily build rockets for a living.
White Knight, a friendly party in a takeover bid. Used to describe a party that buys the shares of an organization to help prevent the takeover of that organization by another party (that is making a hostile bid).

Who trades currencies, and why?

Daily turnover in the world's currencies comes from two sources:

Foreign trade (5%).
Companies buy and sell products in foreign countries, plus convert profits from foreign sales into domestic currency.

Speculation for profit (95%).
Most traders focus on the biggest, most liquid currency pairs. "The Majors" include US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. In fact, more than 85% of daily forex trading happens in the major currency pairs.

What's Forex?

"Forex" stands for foreign exchange; it's also known as FX. In a forex trade, you buy one currency while simultaneously selling another - that is, you're exchanging the sold currency for the one you're buying. The foreign exchange market is an over-the-counter market.

Currencies trade in pairs, like the Euro-US Dollar (EUR/USD) or US Dollar / Japanese Yen (USD/JPY). Unlike stocks or futures, there's no centralized exchange for forex. All transactions happen via phone or electronic network.

WHAT IS FOREX CURRENCY TRADING ?

Foreign Exchange market is the biggest financial market in the world, with a potential of fast and great gains and a sizable number of investors. The advent of internet technology is what made Forex trading grow considerably popular as well as accessible with various types of investors.

If you read about investing, you've seen the word forex trading. But because forex doesn't get much publicity in the major publications and websites, many investors don't know that forex is just short for "foreign exchange". So trading the forex market is simply trading foreign currencies.

As recently as ten years ago, currency trading had high barriers to entry, so only large banking and institutional firms had access to the tools and systems required to play in the forex trading game. Recently, however, technology has developed to the point that any individual investor can hop right in and trade with one of the many online platforms.
One other important distinction to make is that forex currency trading is not centered on an exchange like the NYSE or NASDAQ. There is no central body or organization required to act as middleman. Trading circulates between major banking centers around the world.

Anybody can open an account and buy and sell in any quantity. Because the brokers have thousands of investors placing orders through them, they are able to meet the large minimum transaction size by purchasing in large blocks and distributing currency amongst the purchasing investors.

Although it is now easy to start trading forex, it is a complicated and complex market. While it offers fantastic opportunity for wealth, it is also very easy to lose your shirt in a hurry. Before trading forex, do your homework and read as much as you can find before investing your hard earned money.