What is Forex market? What is the difference between other markets you have known? Forex market is a place where banks, businesses, governments, investors and traders come to exchange and speculate on currencies. The Forex market is also called the “FX market” or the “Foreign exchange market”.
Definition of Forex market
The foreign exchange market is an international decentralized financial market, the place where foreign exchange activities are conducted through supply and demand and it is the largest and most liquid market in the world with an average daily trading value of 3.98 million USD. Fx Market is open 24 hours a day, 5 days a week with the largest financial centers located in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris, and Sydney.
Features of Forex market
Forex market is unique for the following characteristics:
– Its huge trading volume represents the largest asset class in the world resulting in high liquidity;
– Its geographical dispersion;
– Its continuous operation: 24 hours a day, except weekends, ie, trading from 20:15 GMT on
– Sunday until 22:00 GMT Friday;
– The variety of factors that affect the exchange rates;
– The margins of relative profits are low compared to other fixed income markets
– Use leverage to increase profit margins and losses and to account size.
Functions of the Forex market
Foreign exchange market actively participate in the social reproduction process, through the foreign exchange transactions and they perform the following basic functions:
1. Firstly, serving international business activities such as converting purchasing power from one country to another in order to provide timely foreign currencies for payment flows in the fields of trade and international non-commercial.
2. Secondly, strengthening foreign currency reserves of banks and businesses.
3. Thirdly, adjust the exchange rates (market rates and exchange rates prescribed by the State).
4. Fourthly, hedge currency risks by maintaining appropriate monetary positions.
5. Fifthly, speculation makes a profit by earning speculative profits on the basis of exchange rate differences, practicing monetary policies in service of the State in the field of foreign exchange.
Where is the currency traded on the Fx market?
A good thing about Fx trading is that you don’t need to literally exchange money and you don’t need to set up an international bank account. Everything is as simple as opening an account with a forex dealer (commonly known as a broker). They are not exactly brokers like in the stock market, they work because of the spread (the difference between the bid and ask price). While trading Forex, you do not have to pay commissions the same as for trading securities.
How is currency traded on the Fx market?
Currencies are traded between banks and through agents. Dealers establish pairs based on the buying and selling pressure they perceive due to the supply of one currency relative to another.
Currency is traded on the Forex market as a decentralized market. That simply means that market participants do not trade at a worldwide exchange. Two examples you may know are NYSE and NASDAQ. The NYSE is a stock exchange with a specific location, where the stock is traded. NASDAQ, on the other hand, is a decentralized market where there is no physical position for people to trade. These are the two different ways stocks are traded.
Advantages of trading on the Forex market
– Forex is the largest market in the world, with trading volume of over 3 trillion per day. This strong liquidity makes it easy to enter and order.
– Trade whenever you want: No opening bells in the forex market. You can enter or close the order whenever you want from Sunday around 5pm EST to Friday around 4pm EST.
– Easy to join: You can top up your trading account with about $ 250 at many Forex platforms around the world and start trading immediately.
– There are fewer currency pairs to focus on, instead of analyzing thousands of stocks.
– Free to trade anywhere in the world with just a laptop and internet required.
– It is possible to trade without commission (commission = 0) with many retail brokers around the world, and generally the transaction costs are still lower than stocks and commodities.
– Volatility allows traders to make profits in any market condition whether the price is up or down and gives you many opportunities to enter weekly orders.
While the Forex market is clearly a great market for trading, I would like to note to all newbies that Forex trading always brings with it profit and risk. Many market participants only think about profit and ignore the risks involved, this is the fastest way to lose all the money in your trading account. If you want to start trading on the Forex market in the right direction, it is important that you are aware of and accept the fact that you may lose money in any trade.
If you want to learn more about trading knowledge, you can refer to “Trading Strategy by Price Action“. When you are confident about your trading strategy, you are completely can open Forex accounts and earn real profits from Forex Trading
Synthesized by top4forexbrokers.net