FOREX actually means Foreign exchange and is used in lieu of currency or fx. FOREX means exchanging one currency for another currency or trading one currency type to another currency type. Generally speaking, FOREX is done through foreign exchange markets within different countries throughout the world. FOREX markets are the biggest markets one can find today. A typical foreign exchange market trades currency between large governmental and private sector banks, multinational companies, currency speculators, huge financial institutions. The large size of forex markets can be seen by the figure of $3trillion which is the currency trading on a daily basis.FOREX markets are special throughout the world due to their daily trading volumes, different and varied kinds of traders involved, extremely volatile markets throughout the world, longer trading hours of 24 a day, geographical distribution of the markets, numerous factors affecting the exchange rates, high amount of risk involved in trading due to huge volumes and volatility of markets. Novel financial instruments called derivatives also trade around $2 trillion daily in addition to the traditional ones.
A few top international banks that usually trade or participate in forex trading are Bank of America, Union bank of Switzerland, Citibank, Deutsche bank, Barclay’s capital, Hong Kong and Shanghai Banking Corporation, JP Morgan and some others. A forex market is different from a stock market in that not all the players have access to the prices. Access to the price of a level is confined to the players in that level only. On top of all comes inter-bank market which is traded by the largest investment banking firms of the world. The trading in inter-bank market is almost half of all the transactions done in the forex market. Apart from the top banks, some nationalized banks, financial institutions, investment management companies, commercial firms, hedge funds. The important trading centers through the world are New York, London, Tokyo and Singapore, but almost all the banks trade. As there is a difference in the time zones of countries in the world, as the American trading session ends, Asian trading session begins, and then European trading session begins and the circle goes on for the entire 24 hours of a day. Retail brokers participate in trading but they do only a minute percentage of 2-3 of the total trading, which is roughly $40 billion. New and small investors should be aware of all the proceedings and technical terms within the market or else they are highly vulnerable to forex scams.
Different kind of factors influence the currency or FOREX trading in forex markets, some of them are economic factors, political issues, market conditions and the psychology of the current market situations. Financial instruments like spot, forward, future, swap, options and exchange traded funds are available. Some trading characteristics need to be well known before taking a plunge into trading in forex markets. Different currencies trade in a single market, so due to this interconnected markets, there is no single currency rate, rather a number of different rates. Large banks trade in billions, sometimes for their individual customers but mostly for their own account.
Finally it can be said that a FOREX is a highly liquid market and has to be carefully analyzed before one decides to enter into it. The size being huge and markets being unpredictable, it is not a cup of tea for everyone aspiring to make profits in the forex market. One should be ready to loose money before acquiring all the required knowledge to book profits in a FOREX market in the future.
Related posts:
- Currency trading
- What is a forex market
- Universal Foreign Exchange trading
- The Forex market of all US equity markets
- How To use daily pivots to profit from the Forex market
