The Foreign Exchange Market is the platform through which the different currencies of the world are traded. Also known as the Forex or the FX Market, it is the largest of any of the financial markets. The numbers posted in trading volume on a typical day are close to $4 trillion U.S. dollars, with around 1/3 of that amount traded in London markets.
The principle is easy enough to understand. In fact, any traveler has experienced it upon arrival in a foreign country. In order to obtain local currency, one must sell one currency and buy the other. FX traders operate on the same system, though on a much grander scale.
A look through the financial section of any newspaper will offer further insight to any interested parties. In the exchange rate listings, readers will notice a "bid" price listed along with the "ask" price for the same currency. The ask price will be slightly higher than that which could be obtained by the average customer, as transaction fees are in effect included in these quotes. If the same customer wished to sell the currency back to a bank, the "bid' price would be the one quoted, at a slightly lower rate. This difference - which always exists between the bid and ask quotes and is known as the "spread" - makes the FX Markets consistently lucrative for major banks.
In terms of investment strategies for FX Markets, there are several different ways to approach it. For investors who like to read more extended trends of a national currency, the goal is to find the direction early. On the other hand, there is a lot of money to be made in short speculation, and the key is to guess right while laying down the maximum amount possible.
Because Forex Markets are profitable only when a tremendous amount of money is involved, the average stock market investor may see them as out of reach. The largest banks, which are also the ones setting the bid vs. ask price and getting access to these quotes, control the majority of transactions in the FX markets. Close to 80% of deals made everyday in the Forex Markets are transacted by one of the world's 10 biggest banks. Companies like JP Morgan, Barclay's and Deutsche Bank set the tone.
Speculation in the FX Markets is rampant. Hedge funds - known for the aggressive style of investment - have been a major force in FX since the mid-1990s. One of the advantages of such an aggressive style is the ability to counteract influence made on behalf of a currency by its government. While financial ministers may be able to control devaluation using a country's central bank funds, investors can overwhelm a market with volume.
The reasons why a country's currency may become stronger or weaker are numerous. National budget deficits can contribute, as well as the ability of a government of handle a budget surplus. Overall GDP growth is always important, as well as political developments.
An interesting feature of the FX is the fact that they never close between Monday and Friday. After the close of business in New York, traders can continue on in Europe and finally Asia before New York markets open once again in the morning.
The principle is easy enough to understand. In fact, any traveler has experienced it upon arrival in a foreign country. In order to obtain local currency, one must sell one currency and buy the other. FX traders operate on the same system, though on a much grander scale.
A look through the financial section of any newspaper will offer further insight to any interested parties. In the exchange rate listings, readers will notice a "bid" price listed along with the "ask" price for the same currency. The ask price will be slightly higher than that which could be obtained by the average customer, as transaction fees are in effect included in these quotes. If the same customer wished to sell the currency back to a bank, the "bid' price would be the one quoted, at a slightly lower rate. This difference - which always exists between the bid and ask quotes and is known as the "spread" - makes the FX Markets consistently lucrative for major banks.
In terms of investment strategies for FX Markets, there are several different ways to approach it. For investors who like to read more extended trends of a national currency, the goal is to find the direction early. On the other hand, there is a lot of money to be made in short speculation, and the key is to guess right while laying down the maximum amount possible.
Because Forex Markets are profitable only when a tremendous amount of money is involved, the average stock market investor may see them as out of reach. The largest banks, which are also the ones setting the bid vs. ask price and getting access to these quotes, control the majority of transactions in the FX markets. Close to 80% of deals made everyday in the Forex Markets are transacted by one of the world's 10 biggest banks. Companies like JP Morgan, Barclay's and Deutsche Bank set the tone.
Speculation in the FX Markets is rampant. Hedge funds - known for the aggressive style of investment - have been a major force in FX since the mid-1990s. One of the advantages of such an aggressive style is the ability to counteract influence made on behalf of a currency by its government. While financial ministers may be able to control devaluation using a country's central bank funds, investors can overwhelm a market with volume.
The reasons why a country's currency may become stronger or weaker are numerous. National budget deficits can contribute, as well as the ability of a government of handle a budget surplus. Overall GDP growth is always important, as well as political developments.
An interesting feature of the FX is the fact that they never close between Monday and Friday. After the close of business in New York, traders can continue on in Europe and finally Asia before New York markets open once again in the morning.
About the Author:
Gnifrus Urquart understands any business requires internet marketing experts these days. search engine optimisation services are a big element of that.
Getting to Know How Foreign Exchange Markets Work
4/
5
Oleh
rikixy' Site