Forex is the nickname for the Foreign Exchange Market. In the United States, there are several branches of the stock market, each with their own name. For instance, some stocks trade on the Dow Jones, others on Nasdaq.
Of course, all stock market transactions in the United States take place on the New York Stock Exchange (NYSE). In other countries the same is true. There may be one or more distinct markets.
However, international trade takes place on the market termed the Foreign Exchange Market, or Forex. Several countries across the world in almost every time zone participate in trade on Forex, with multiple currencies being utilized and stocks and commodities from all participating countries being offered for trade.
Because there are so many nations and time zones involved, Forex does not function as a “business day” entity like most domestic stock markets. It remains open for trade 24 hours a day, 5 days a week.
Of course, these additional hours increase the risk factor intensely for those of us who are human and obviously cannot monitor our investments 24 hours a day. This means that the value of your holdings could potentially plummet overnight, while you sleep, because other countries are still trading while you are in a dream world.
Again, it is like a car – there are many moving pieces under the hood, and just because you cannot see them does not mean they are not functioning.
This is one reason for several safety options, like limit orders, which we will discuss later. This is also why it is strongly recommended that your first attempts to make money on the stock market are not transactions that take place within the Foreign Exchange Market but on a standard nine-to-five domestic trading market.
In our car analogy, this would be comparable to having asked someone who has never driven or even changed the oil in a car to rebuild the engine.
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