FOREX KNOW CLOSER. Forex trading is the trading of currencies from different countries to each other. Forex is short for Foreign Exchange. For example, currency in circulation in Europe called Euro (EUR) and in the United States, the currency in circulation is called the U.S. Dollar (USD). An example of forex trading is to buy the Euro while simultaneously selling U.S. Dollar. This is called will be abbreviated as EUR / USD.
Meanwhile, the Forex market is called a non-stop cash market where currencies are traded countries, usually through a broker. Foreign currencies are constantly and simultaneously bought and sold in local and global markets and the emergence of 'an increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.
Forex market is often referred to as the foreign exchange market, this is a huge market with growing financial and liquid (can deposit and liquidated at any time), which operates 24 hours a day. This is not a market in the traditional sense because there is no central trading location. Most of the trading is done through electronic trading networks. The foreign exchange market allows companies, banks and other financial institutions to buy and sell foreign currency in large amounts.
The main market for the currency markets are "inter bank" in which banks, large corporations and large financial institutions manage the risks associated with fluctuations in currency exchange rates.
MAJOR CURRENCIES
The following are the major currencies traded in the market:
U.S. Dollar (USD)
Japanese Yen (JPY)
Euro (EUR)
Canadian Dollar (CAD)
Australian Dollar (AUD)
Swiss Franc (CHF)
British Pound (GBP)
MARKET ACTORS
In general, forex Market participants came from various groups including:
- customer
- Banks and Financial Institutions
- broker
- government
- Business Performer
- speculator
Customers, such as multinational corporations, to participate in the forex market because they need foreign currency to their trades in other countries. As such, a certain company based in the UK need to use the foreign exchange market to buy the currency they need to pay for their partner companies in other countries that sell heavy equipment.
Banks and financial institutions, is the most active participants in the forex market. They deal with other financial institutions to ask their foreign exchange and currency they can buy what they need in the forex market. In addition to central banks and governments, one of the greatest actors in the forex transactions are banks. Interbank market is a market where big bank2 transact among themselves and determine the price of the currency to be seen by traders as individual as we are on the computer screen.
Banks, in general, acting as a dealer who buy / sell currency at the bid / ask her. One way these banks get money is to sell the currency at a higher price than he bought to its customers. Because the forex market is not centralized alias decentralized, then the natural thing to see one bank to another bank had little difference in the exchange rate
Broker is a company with links computer software or phone lines to banks around the world. It is the job of forex broker to find out what bank has the highest level to buy the currency and what the bank had the lowest rate to sell the currency.
Using a broker allows the bank to find the best deal available in the world. Forex brokerage firms, but is not related to money itself, but only charge a commission for their services.
Government, forex is the most influential actors, the central bank. In many countries, the central bank is an arm of the government and its policies run jointly with the government. However, some governments feel more independent. A central bank more effective in carrying out their duties to boost the economy. Regardless of how indipendennya a central bank, government representatives are regularly consulted with representatives of central banks to discuss monetary policy. Thus, governments and central banks usually have a package in terms of monetary policy. Central banks often intervene in the market for the purposes of a particular country's economy.
Business actors, is one of the biggest clients of these banks, those involved in international transactions. Both businesses are selling goods to international clients or to buy goods from international suppliers, they have to deal with the volatility of currency fluctuations. Uncertainty becomes hated by management and business owners. Dealing with foreign exchange risk is a major problem for multinational companies. For example: a firm in Germany ordered the equipment from the factory in Japan to be paid in yen a year from now. Because exchange rates can fluctuate wildly dg throughout the year, the German company will not know whether the Euro will be spend more or not at the time of shipment later. One way for businesses to reduce the uncertainty due to foreign exchange risk is to go to the spot market and transact directly to the foreign currency they need. But, unfortunately, a businessman may not have enough money on hand to make a spot or do not want to hold the amount of foreign currency which is very much for a long time. Hence business people often apply the hedging strategy to lock a specific currency at a certain price for a position in the future.
Speculators, they are not to hedging so not subject to price movements for reasons of international transactions, speculators are trying to earn money by taking advantage of price fluctuations. One of the most famous speculator George Soros possible. Billionaire who is known to decrease speculation in British Pound generating 1.2 billion dollars less than a month! Some critics say that such people are responsible for the Asian financial crisis of the late 90's.
