Why The Forex Is Best For Trading

April 4, 2019by 0

so guys in this blog I will talk all about the forex trading

  • what is forex
  • How the currencies are trading
  • The market player in the forex market

 

WHAT IS FOREX -The foreign exchange market is a global decentralized or over-the-counter market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspects of buying, selling and exchanging currencies at current or determined prices. The foreign exchange market, which is usually known as “forex” or “FX,” is the largest financial market in the world. Compared to the measly $74 billion a day volume of the NewYork Stock Exchange, the foreign exchange market looks absolutely ginormous with its $4TRILLION a day trade volume. Forex rocks our socks!

 

HOW THE CURRENCIES ARE TRADING– Currencies Are Traded in Pairs Forex trading is the simultaneous buying of one currency and selling another. Currencies are traded through a broker or dealer, and are traded in pairs; for example the euro and the U.S.dollar (EUR/USD) or the British pound and the Japanese yen (GBP/JPY). When you trade in the forex market, you buy or sell in currency pairs.

 

THE MARKET PLAYER OF FOREX MARKET– Now that you know the overall structure of the forex market, let’s delve in a little deeper to find out who exactly these people in the ladder are. It is essential for you that you understand the nature of the spot forex market and who are the main players.

 

  1. The Super BanksSince the forex spot market is decentralized, it is the largest banks in the world that determine the exchange rates. Based on the supply and demand for currencies, they are generally the ones that make the bid/ask spread that we all love. These large banks, collectively known as the interbank market, take on a ridonkulous amount of forex transactions each day for both their customers and themselves. A couple of these super banks include UBS, Barclays Capital, Deutsche Bank, and Citigroup. You could say that the interbank market is THE foreign exchange market.
  2. Large Commercial Companies-Companies take part in the foreign exchange market to do business. The volume they trade is much smaller than those in the interbank market, this type of market player typically deals with commercial banks for their transactions. Mergers and acquisitions (M&A) between large companies can also create currency exchange rate fluctuations. In international cross-border M&As, a lot of currency conversations happens that could move prices around.
  3. Governments and Central BanksGovernments and central banks, such as the European Central Bank, the Bank of England, and the Federal Reserve, are regularly involved in the forex market too. Just like companies, national governments participate in the forex market for their operations, international trade payments, and handling their foreign exchange reserves.

Meanwhile, central banks affect the forex market when they adjust interest rates to control inflation. By doing this, they can affect currency valuation. There are also instances when central banks intervene, either directly or verbally, in the forex market when they want to realign exchange rates. Sometimes, central banks think that their currency is priced too high or too low, so they start massive sell/buy operations to alter exchange rates.

 

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