As we all know FOREX is the acronym of foreign exchange. It is an instrument of great importance to the traders worldwide. The foreign exchange market is the largest and the most liquid financial market in the world.
The foreign exchange market (forex, FX, or currency market) is a worldwide financial market for the trading of currencies. Forex trading deals with wide range of different types of buyers and sellers. The foreign exchange market determines the relative values of different currencies based on their availability in the market. The primary purpose of the foreign exchange is to assist international trade and investment, by allowing businesses to convert one currency to another currency.
The traders include large banks, central banks, institutional investors, currency speculators, corporations, government and the other institutions. It assists the traders for indulging in speculation. Some traders or the investors around the world borrow low yielding currency i.e the currency with a lesser value in the market and invest in high yielding currency. This can reduce the level of competitiveness in the countries involved in such a speculation.
The foreign exchange market is divided into levels of access. At the top is the inter-bank market which is made up of the largest commercial banks and securities dealers. Within the inter-bank market, spreads, which are the difference between the bid and ask prices, are razor sharp and not known to players outside the inner circle.
The dealings in the currency market mainly involve the purchase of some quantity of currency in exchange of the quantity of some other currency. The average daily turnover in the global foreign exchange market is continuously growing. The increase in turnover is due to a number of factors:
the growing importance of foreign exchange as an asset class,
the increased trading activity of high-frequency traders,
and the emergence of retail investors as an important market segment.
The growth of electronic execution methods and the diverse selection of execution venues have lowered transaction costs, increased market liquidity, and attracted greater participation from many customer types. So basically this was responsible for the growth in the number of retail investors. These factors made participating in the foreign exchange market within the reach of the retailers.
This foreign exchange market is unique in terms of its vast dispersal around the globe due to the liquidity involved. It operates continuously except on weekends. The exchange rates are never stable so this continuous monitoring is required. In this market the profit factor is low, thus the leverage is used. Forex fixing is the daily monetary exchange rate fixed by the national bank of each country. The central banks use the fixing time and exchange rate to evaluate behavior of their currency. Fixing exchange rates reflects the real value of equilibrium in the forex market. Banks, dealers and online foreign exchange traders use fixing rates as a trend indicator and plan their investments accordingly. Market psychology,political conditions, economic factors are the major determinants of foreign exchange rates. Besides that our forex signal service can help you keep yourself update with all the ups ad downs in the forex market and formulate your policies accordingly. For subscription you can log onto: www.fxproalert.com
Ben Wade is a Forex trading expert who has been working with the Forex alert company and has been helping clients earn more with the Forex Signal and Forex Consultant services.