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How The Forex Market Works And Who It Is Suitable For

March 7, 2013 0 Comments

In the Foreign Exchange market (also known as Forex or FX) currencies are traded against one another. Forex trading occurs between individuals, between large banks, central banks, currency speculators, multinational corporations, governments, and many other institutions. Individual traders are only a small percentage of the market and oftentimes participate indirectly in the market via banks or brokers. The Foreign Exchange market is the largest financial market in the world and it is estimated that the average daily trade is over USD $3 trillion.

Readily Available

Forex trading is available to all, but like already mentioned above, not everyone can trade in it directly. Furthermore, the Forex market is divided into levels of access. The inter-bank market (which is top level) consists of the largest investment banking firms. Those that are top level have access to different spreads—to better ones, of course, where the difference between bid and ask prices is little. The lower on the access levels—the wider the difference between the bid and the ask prices.

Global Market

Forex trading happens everywhere and at all times—so wherever you are on the globe, if you use an online forex software, you can trade. There are trading centers in London, New York, Tokyo, and Singapore, but banks throughout the world trade currency and do so almost 24 hours a day (due to time differences—by the time the European session begins, the Asian one shuts, and by the time the North American opens, the European one is about to shut—markets operate non-stop).

News and Information

marketA big advantage to Forex trading is that it is accessible to everyone. “Matters” that influence the market, that cause fluctuations in the Foreign Exchange market are usually caused by monetary flows and/or expectations in monetary flows because of GDP growth, inflations, interest rates, trade deficits or surpluses, etc. This is to say that “matters” that influence the market are available to everyone—via the news, via news releases, via public information.

As already mentioned foreign exchange trading happens via banks, brokers, or other institutions. There are various marketplaces where currency trading is available and they differ from each other by methods of trading as well as by the rates that they offer. This comes to show that that there is not a single dollar (or another currency) rate but that different rates exist and that these depend on the bank, institution, or broker. The various market rates are, however, often very close.

Trading methods vary as well. You can chose to trade online using an online forex trading software, via banks, via brokers; you can get consultation, or use methods to forecast movements of the market, you can seek trading advice as to market dynamics. Your level of knowledge, and/or confidence, your understanding of the Forex market, your awareness of world economics and world news will determine the way your trade currencies. Furthermore, your understanding of psychology and your ability to predict the ways the market shifts will also determine the ways in which you choose to trade Forex.

Filed in: How To Trade Forex

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Providing technical reports and forex news each day on major currencies and economic data. covering the US Dollar, Euro, British Pound and more. Contact me if you would like your news published here. Free Forex News

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