Learn how to trade Forex from a reliable financial broker
The foreign exchange market (Forex) is the largest investment market in the world today. Indeed, the growth of this market continues to rise annually. Trading volumes on the Forex market reached in 2010 to $ 5 trillion a day. By itself, it represents a 20% increase from what it was in 2007. There are no new statistics for trading volumes on the Forex market today, but it suffices to know that the daily trading volume on the New York Stock Exchange alone exceeds $ 25 billion. Currency exchange is the change in the currency of the country of origin to that of another country for the purpose of tourism, trade or other reasons. Thus, the exchange rate is the price paid for one currency against another. Big companies that want to expand into global markets will need to conduct financial transactions in other countries' currencies. This makes companies vulnerable to risk if they want to buy foreign goods or services, especially if fluctuations hit the value of the currency in which they must buy. Here comes the role of the Forex market, which provides means to hedge the risks by fixing the rate at which the financial transaction is completed in the future. Individual investors buy or sell one currency in exchange for another, waiting for it to gain or decrease its value, which leads to profit, and this process is called (speculation). The official currencies in the world reach more than 100 different currencies, except that the international forex transactions are done using the main major currencies, which are the US dollar, the euro and the Japanese yen. In addition, other common currencies are traded like the British pound, Australian dollar, Canadian dollar, New Zealand dollar and Swiss franc, among others. These currencies are traded as major pairs through spot transactions, futures and CFDs. The Forex market, which is by volume the largest global market, operates 6 days a week around the clock as it opens its sessions on Sunday afternoon in the United States and closes on Friday afternoon. During Forex trading hours, market participants should pay attention to government reports, official economic news and its release times. As the economic indicators that are published from the major countries usually coincide with the more active trading times in the Forex markets, this means greater opportunities in currency rates, and buy and sell orders may be executed at prices that are different from what a trader expects at the beginning of the sessions.
Who trades in Forex
The largest trading volumes in Forex come from banks that represent a large proportion of the total daily deals, as banks provide facilities for Forex dealers and conduct trading deals from their trading offices. In this case, the bid and ask price differentials represent the bank’s profits.
Central banks are responsible for the movement of the Forex market, as central bank interest rate policies affect currency rates significantly. The measures it takes in the Forex market ensure stability and increase the competitiveness of the country's economy. Central banks also use a range of strategies that reduce inflation, which in itself is an important and long-term indicator for Forex traders.
Major companies trade Forex in order to reduce the risks associated with buying foreign goods and services at the value of the original currency of that country. For example, a European company buys the US dollar if it wants to buy goods from an American company. It also gives a level of safety to the company's external investments.
The volume of deals carried out by individual investors in the Forex market is very low compared to banks and major financial institutions. However, the popularity of the Forex market continues to increase among individuals who depend in their trades on basic factors such as interest rates and inflation rates, and technical factors such as technical indicators and price patterns.
The Forex market, unlike most other financial markets, has no physical market present like the stock market or indices. However, it is traded through a global network of central banks, major companies and individuals, and this means that currency rates fluctuate continuously against each other, which creates profitable investment opportunities for market participants.