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Tanima Dutta, Lovely Professional University
Unit 14: Currency/Forex Market

Unit 14: Currency/Forex Market Notes

CONTENTS
Objectives

Introduction
14.1 The Forex Market
14.1.1 Spot Market and the Forwards and Futures Markets
14.2 Reading a Quote and Understanding the Jargon

14.2.1 Reading a Quote
14.2.2 Currency Pairs in the Forwards and Futures Markets
14.2.3 Differences between Forex and Equities
14.3 History and Market Participants

14.3.1 The History of the Forex: Gold Standard System
14.3.2 Market Participants
14.4 Economic Theories and Data
14.4.1 Major Theories

14.4.2 Economic Data
14.5 Summary
14.6 Keywords
14.7 Review Questions

14.8 Further Readings
Objectives

After studying this unit, you will be able to:
Explain the forex market
Discuss how to read a quote and understanding the jargon
Elaborate the history and market participants
Discuss the economic theories and data

Introduction

Foreign exchange (forex or FX for short) is one of the most exciting, fast-paced markets around.
Until recently, trading in the forex market had been the domain of large financial institutions,
corporations, central banks, hedge funds and extremely wealthy individuals. The emergence of
the internet has changed all of this, and now it is possible for average investors to buy and sell
currencies easily with the click of a mouse.
Daily currency fluctuations are usually very small. Most currency pairs are moveless than one
cent per day, representing a less than 1 % change in the value of the currency. This makes foreign
exchange one of the least volatile financial markets around. Therefore, many speculators rely on

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