Participants in the forex market generally fall into one of two categories: financial transactors and speculators. Financial transactors are active in the forex market as part of their overall business but not necessarily for currency reasons. Speculators are in it purely for the money.

Cross trades can be especially effective when major cross-border mergers and acquisitions (M&A) are announced. If a UK conglomerate is buying a Canadian utility company, the UK company is going to need to sell GBP and buy CAD to fund the purchase. The key to trading on M&A activity is to note the cash portion of the deal.

Fundamentals are the broad grouping of news and information that reflects the macroeconomic and political fortunes of the countries whose currencies are traded.

Liquidity refers to the level of market interest — the level of buying and selling volume — available at any given moment for a particular asset or security. The higher the liquidity, or the deeper the market, the faster and easier it is to buy or sell a security.

Spot refers to the price where you can buy or sell currencies now, as in “on the spot.” If you’re familiar with stock trading, the price you can trade at is essentially a spot price. Technically, the term refers to the nearest settlement date on which a transaction can be made and is primarily meant to differentiate spot, or cash, trading from

One of the reasons forex markets remain as lightly regulated as they are is that no developed nation wants to impose restrictions on the flow of global capital. International capital is the lifeblood of the developed economies and the principal factor behind the rapid rise of developing economies like China, Brazil, Russia, and India. The forex

When people talk about the “currency market,” they’re referring to the interbank market, whether they realize it or not. The interbank market is where the really big money changes hands. Minimum trade sizes are one million of the base currency, such as €1 million of EUR/USD or $1 million of USD/JPY. Much larger trades of between $10 million and

making money in the forex market is not necessarily the hard part. More often than not, keeping what you’ve made is the really hard part.

Speculators (specs for short) are what really make a market efficient. They add liquidity to the market by bringing their views and, most important, their capital into the market. That liquidity is what smoothes out price movements, keeps trading spreads narrow, and allows a market to expand.