Forex is not any common attribute but it does mean a lot in the world of trading and exchange. It is not anything that is easy to understand or handle. Forex is an important concept within itself. Put differently it will sound like “for exchange” but the full form is called FOREX. We will know each every information about this term starting within a few moments. But before that, I need to tell you guys that people who are really into foreign currency must know this term. Otherwise, you may have to face with its drawbacks sooner than you think.
Simply put, Forex is the marketplace where currencies all across the globe are traded or exchanged. Millions and millions of dollars are traded every day at the Forex market making it the largest liquid money market in the world. It is a decentralized marketplace. Meaning it has no physical existence. It is a digital platform where you can trade currencies anytime from anywhere. You can call it an electronic network of a financial institution, business, and brokers. The Forex market is open 24/7, you can do all the deals regarding currency anywhere and anytime.
Pairs and Quotes
Even Forex comes with some types. Two of them being the pairs and the quotes. Pairs mean things like USD/CAD. It means the exchange rate of the US Dollars versus the Canadian Dollars. The currencies from different countries got different value and they also differ in case of exchange rates. We need to know the different values with the exact exchange amount. The Internet can sometimes confuse but not Forex. Forex will also help you to understand the concept of buying foreign currencies. Like in how many Canadian Dollar you can buy US Dollar.
Here comes another one. There are three types of lots in Forex. They are micro, mini and standard lots. To be more specific, a micro-lot means 1000 worth if a specific currency, a mini 10,000 and a standard 100,000. When you go to a bank for exchanging foreign currency with the actual money, in Forex you trade them in blocks without any reduction that the banks may perform while exchanging as well.
As mentioned above, the Forex market is the largest foreign currency exchange market and it is located almost all over the world. But the centers are located in the city where the hearts of finance are located. The Forex is located in large cities like London, Sydney, Tokyo, Singapore, and Hong Kong and of course Frankfurt.
How to trade in the Forex Market?
By now, many of you are interested in trading your currencies through Forex but do you know the trading method of the Forex. It may be unknown to the beginners but here is the process.
But before that, let me tell you that once upon a time Forex market was accessed to only a limited amount of time. Only the governments and some financial officers could access to these markets. But now, as the competition gets bigger the space of accessing also enlarges.
Remember one thing that you cannot exchange the physical money. Just the blocks or the lots of the Forex that can be exchanged as a foreign currency. The exchanging also depends on the transactions prices relative to your and other countries.
Also known as the spot market deal, it is solely for business purposes and for immediate deals that should be completed within two business days. But the USD/CAD is the major exception because they can be exchanged within one business day as the transaction rate is higher than any other currencies. A spot transaction is also driven by the economic strength, interest rate differentials as well. It also depends on how active your own currency is.
It is not as easy to trade as it sounds. The traders will not purchase the currencies from the Forex market just like that. Even when you are a buyer, the thing that will matter to you the most is the transaction difference and the amount of profit the buyer will get. For which the buyers or retailers will roll over the currencies. They just reset the position of their currencies with some interest rates.
You will need some financial securities and Forex does offer you that. The buyer and seller settle on an agreement that to trade on a given date. They will be non-negotiable and it shall continue until the given date expires.
It may seem a little bit complicated than the Forex has so many features but once you get used to this you will never want to get out of this as this method is safe plus you get to have lots of profits that you cannot even imagine.