Forex Trading; What Exactly Is It?

By Lynn A. Granata

Have you ever heard the term Forex Trading before? To be honest with you, neither have I.  First lets break it down. We will take a look at the word forex itself.  It can be broken down into syllables which gives us a good idea. So here is an example of what we mean when we break down this small two syllable word.

for/ex

The first three letters of the first syllable may or may not give it away as to what word it stands for.  Foreign is the word that syllable 1 stands for.  Ex, the last syllable can be a lot of words in the english language. Okay, now when we use the word foreign, most of us in the United States of America expect that to mean anywhere overseas. That doesn't necessarily include Canada or South America, but it still might to some people.  The last syllable is short for the word exchange.  

Put the two shortened words together and you have forex.  Foreign Exchange Trading, answer to the question in the title caption is trading with continents abroard. It is a relatively common term and it's been used a lot these days. Forex Trading has become popular through the use of outsourcing in recent years.  Back in the post World War 2 era, there were hundreds of thousands manufacturing jobs in America.  

When the economy got weak back around 30 years ago, the factories moved to countries such as China, Taiwan, Africa, India, etc. The pay in these countries are far lower than what you could pay employees for the same hard labor in the US.

So the owners of these factories may still have their corporate headquarters here in the states, but their global movement is much greater than it was before. All because they can open up foreign bank accounts within these countries, and stash their profits in banks in any one or more foreign banks.  European banks have a lot of trading going on with American businesses. It's really difficult to say for certain whether or not if forex trading is illegal. The only time this could be unethical is if the corporate executives profit directly off of what the hard labourers make.  As opposed to what these products yield in the global market economy.

Forex has been abused in recent decades and it is difficult to monitor completely. Oil, for instance has been the target of forex trading scams overseas.  The large corporations wanted the freedom to have their assets tied up in foreign banks, so that they didn't have to report it to our government. Here is where forex trading has been abused and in fact really does cause harm to the global economy.