People who are unaware about what forex
trading is, this article can be very helpful for them.
There are several markets—markets for options, futures, stocks and currencies. These are the most accessible markets for traders. However, in this article we will introduce you the concept of forex *(FX) or currency trading.
FX or foreign exchange trading is the trading of currencies. The currencies are sold and brought against one another in foreign exchange market. People loosely refer this market as FX market, currency market or forex market.
There are many people who trade currency online,so called online forex trading,and it is regarded as the best market for trading because of its effectiveness. The costs of transaction for executing this trade are minimal and most of the brokers provide the traders with data and tools, which is required for making the trading decisions. Moreover, the brokers provide all these for free of cost.
The marketplace is open throughout the day and remains closed only on the weekends. This allows the forex traders to design trading hours around their daily obligations. And since it is unpredictable, the market is great for any forex day trader.* It is considered as the largest market in the globe for its daily trading volumes, which are more than 1.5 trillion US dollars. The foreign exchange market is the most suitable market, which exists in the world because it has huge number of sellers and buyers all selling same things. There is even a free information flow and little hindrances for participation.
This market is an OTC marketplace. This means there exist no particular location in this trade where the sellers and buyers meet for exchanging their currencies. Transactions take place over phone, email, ,fax, or through forex trading platform.
There are many players or participants in FX market. They are the investors, businesses, consumers, speculators, large commercial and investment banks and central banks.
Consumers include the immigrants, tourists and visitors of different countries. These people need to exchange their currencies during their trip in order to purchase the country’s local goods and services. They do not have the authority to set prices. These participants just sell and buy currencies according to the existing exchange rate. They make up a major proportion of volume that is traded in the currency exchange market.
Speculators and investors require money to sell and buy investment instruments like bonds, chares, and real estate or bank deposits. Businesses, which export and import services and goods, need to exchange the currencies to make payments for the goods that they bring or services that they render.
Investment banks and commercial banks are ‘price makers’. They sell and buy currencies at bid-and-offer exchange rates, which they announce via their currency exchange dealers. Central banks take part in the FX market not for making profits but to facilitate the monetary policies of their government and to assist in smoothening the rise and fall of rate of their economy’s currency.