Forex Trading. What is the Foreign Exchange Market?
The foreign exchange market or forex is the international market where currency is traded and it is through forex trading that the value of all currency is determined. So it’s with this market that a traveler would get the rate at which their native currency is then transferred into the currency of the country that they are traveling to. The main benefit of the forex for companies is that they can purchase currency in an equal value of their own for use when making international deals and such as it would be easier to pay for goods or services in the native currency of the country you are dealing with than to have to figure out the currency exchange rate. For example, a company purchases some computers from Japan for 100,000 yen, with the foreign exchange market that company can purchase 100,000 yen for the price of its value in its own native currency then use the recently purchased yen to pay for the order. Not all that complicated when it is broken down to the very basics but still it can get a bit tricky the more into it you get.
Unlike the stock market there is no insider information when it comes to the forex; instead the changes and fluctuations in the price are the result of real time current money flow in the world. So there is little room for anyone to truly cheat the system; this being the case, the forex is referred to as the perfect form of competitive marketing. No hush deals or exchanges happening behind closed doors. The market runs and operates on a 24 hour a day basis five days a week, with trading not being allowed on the weekends. The moment there is an update in the state of the market it is released to the public worldwide, so that in theory everyone and anyone could be prepared to make a purchase or sale. This long trading day leaves people with the opportunity to pursue other interests and even careers; working somewhere else during the day and then trading online at night.
The forex is an over-the-counter or OTC market, meaning there is no universal standard between varying currency pairs. The exchanges can occur between individuals via their brokers, between banks and other banks, as well as brokers and banks. If you do not want to do it yourself then you could of course hire a broker to do the trading for you, someone who would spend their entire day watching the market and waiting to make changes to your portfolio in order to garner the biggest gain.
Because of its ease of access and the fact that it can be done on a 24 hour basis forex trading is a booming and constantly developing market that is only likely to continue to grow. As of April of this year the daily turnover rate for the market was a record 3.98 trillion dollars, having made a jump of more than 20% from the recorded turnover in April three years ago.