These days, the word “forex trading” is getting very common so let us have a bird’s eye view of the introduction to the forex trading.
Forex is the short form of Foreign Exchange Market. It refers to the market where two business parties exchange their currency with each other with the mutual consent at a specific rate. It has got importance since early 70s when the floating exchange rate was introduced the international market. Earlier, currency exchange was done at a fixed rate. It bears a margin of greater profits and that’s why, it has become the largest fiscal market around the globe.
This article guides the Forex beginners to get them introduced to this large scale business in which trillions of currencies are being swapped. Two types of currencies are used in Forex trading said to be paired currencies i.e. Base Currency and Quote Currency and are expressed in abbreviated form such as USD for US Dollar, EUR for European currency Euro, etc. The fluctuation rate is called pip.
In fact, both the currencies are placed for bidding and a final price is settled as a result of the exchange. Bid is a Forex term that is used to identify the base currency going to be sold while the quote currency is the one that is going to be purchased.
Fluctuation rates of the currency are contingent upon several factors, e.g. liquidity, market transactions at a brokerage, supply, demand, etc. The game is the speculation indeed that leads to gain or loss according to the present value of currency. The businessman will be interested in purchasing the currency, the value of which he thinks will rise up and likewise, he would like to sell the currency, the value of which is anticipated to fall.
Since fx trading is practiced on an international level, so it has no effect of the economic condition of a specific country whether a country is passing of the peak or the recession, the foreign exchange market keeps on working. However, it merely depends upon speculative events.
The main currencies involved in Forex are dollar, yen and pound. It is 24 hours ongoing business and has no holiday as compared to the stock exchange. The parties involved are big financial institutions, banks, corporations and central government. Nowadays internet has revolutionized the world of Forex trading because now online accounts are being used and currency exchange is just one click away from the investors in this advanced era. So the trend is becoming more popular due to activities of Forex online.
With the fast growing period, if a person wants to set foot in the world of foreign exchange market as a successful businessman, he is expected to grasp the basic concepts and traits of Forex at fingertips because the knowledge about currency rise and fall has the major concern in this trade.
One who deals with currency exchange is called a broker. Being a Forex trader, say, you have bought 500 Euros in the beginning of year 2013 at the cost of 800 US dollars and you expect the value of USD to be increased in the middle of the year. By the time in June, 2013, the value of the US dollar versus the Euro goes up, so this is the super time that you will be able to sell that 500 Euro against 900 US dollars now, thus reaping an extra income of $100 in your pocket.
So this is what we call Forex. Won’t you like to proceed in this ever-growing business?