Like trading in other markets, the Forex operates on a bid/ask price basis. The twin nature of foreign exchange transactions means that forex rates are quoted as ‘two tier’ rates, e.g. USD JPY at 110.00/10 indicates a trader prepared to buy Yen at 110 and sell at 110.10. If this trade is made, the trader will then have secured a 10 pip “spread”, the difference between the buying and selling price. 

The spread between currencies depends on market conditions and how traders around the globe believe each currency is set to perform and its likely volatility. 

Officially quoted Forex rates, though, are generally only available to licensed Forex traders. Most small investors or day traders will acquire their currency from a commercial bank but at a less favorable rate. Finding the best rates, and hence improving the chances of making a profitable trade, is therefore crucial in the Forex marketplace. 

Due to its global nature, the Forex market – as opposed to the Forex players per se – is unregulated. Neither the Fed, the US government nor the governments of any other nation can intervene unilaterally in the Forex. The market in foreign exchange exists and perpetuates itself only because there are always buyers and sellers willing to trade on a cash-only basis in the commodity of currency trading news. The rewards in the Forex have a reputation for being far superior to elsewhere. The downside is that with trades done at breakneck speed in an often volatile market the risks are proportionately higher too. 

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