What is Forex?
The prices of different currencies are in constant fluctuation and this is what makes the basis of earning money in Forex. Those speculating in the right direction get the profit but if the prediction are wrong it obviously goes to loss. Currencies are always traded in pairs and therefore a loss of value of one currency means a rise in the value of another currency. So a trader can always make profit but only thing is to make the trade in the right direction and the right strategy has to be followed. An example of a currency pair quote is EUR/USD – 1.25 which means that 1 EUR is equal to 1.25 USD at the current rate.
The Geography of Forex market
The geography of Forex market is another important factor to keep in mind, after you’ve learned what is Forex, of course. The FX market is open 24 hours from Monday to Friday. The different financial centers in different parts of the world have different hours for trading. It is important to note down the opening and closing of these centers as the market opening and closing have a good impact on Forex trading activities. The main centers are
- Asia- Tokyo, Shanghai and Singapore
- Europe- Frankfurt and London
- America- New York and Chicago
- Pacific- Wellington and Sydney
Who are the main participants of Forex market?
Once you understand what is Forex, knowing the main participants of the Forex market is also important.
Central and commercial banks- Commercial banks constitute the main volume of the currencies. The other participants of Forex hold their accounts in these banks only with which they constitute their businesses.
Investment funds- Investment funds buy stocks and bonds
Companies involved in International trade- The companies which do business across the borders use foreign currency for transactions with the foreign partners.
Currency exchanges- Some nations of the world carry a currency exchange which sets exchange rate and offer exchange services to various businesses
Brokerage companies- These are intermediaries which connects buyers to sellers. They charge a fee for these brokerage services.
Individual investors- The Forex trading was the business of big banks, investment firms and other institutions only until 1986 when the individual traders got the opportunity to trade in Forex market. Now with the fast internet and the growth of online Forex trading, it has become very easy for the individual investors to trade conveniently in the biggest market of the world,
Knowing what is Forex and its related terms is not sufficient to become a smart Forex trader. It needs development of Forex strategies and proper experience before you start making good profits in the long run.