The foreign exchange market is not a "market" in the traditional sense. There is no centralized location for trading as there is in futures or stocks. Trading occurs over the phone and on computer terminals at thousands of locations worldwide. Foreign Exchange is also one of the world's largest market. Daily market turnover has skyrocketed from approximately 5 billion USD in 1977 to a staggering 1.5 trillion US dollars today; even more on an active day.

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Trading Example
On Day 1, customer sells ¥10,000,000 against USD at the going spot rate of 123.20. His position is left open until Day 3.

On Day 3, customer buys ¥10,000,000 against USD to close out his position at the going spot rate of 124.10.

Profit/ Loss and Interest Differential calculations:
Profit on exchange rate:
(¥10,000,000 ÷ 123.20) - (¥10,000,000 ÷ 124.10) = USD588.65

Suppose USD interest is at a premium to YEN by 1%, position interests amount to:
¥10,000,000 ÷ 123.20 x 1% ÷ 360 days x 2 days = USD4.51

Total profit from the transaction:
USD588.65 + USD4.51 = USD593.16

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• LIQUIDITY: FOREX investors do not have to worry about being "stuck" in a position due to a lack of market interest. In this US$1.5 trillion dollar per day market, major international banks are always willing to provide both a bid (buying) and ask (selling) price. Liquidity is a powerful attraction to any investor as it suggests the freedom to open or close a position at will.
• LEVERAGE: FOREX investors are permitted to trade foreign currencies on a highly leveraged basis - up to 20 times their investment with some brokers. An investment of US $10,000 would permit one to trade up to US $200,000 worth of any particular currency.
• 24 HOURS: A substantial attraction for participants in the FOREX market is that it is open 24 hours per day.
• SIZE FLEXIBILITY: FOREX investors have greater flexibility with respect to their desired trade quantity. With most FOREX Brokers you can trade ANY DESIRED AMOUNT over $25,000 USD, specifically tailored to your needs or risk tolerance.
• FREE AND FAIR FLOW OF INFORMATION: Foreign Currency trading is a market where there is little or no 'inside information' and all pertinent, market-moving news is released publicly to everybody in the world at the same time.

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