The Foreign Exchange Market is also known as global market which is decentralized. It is also known as over the counter market for trading of money in to different currencies. Each country follows a certain currency such as $ (dollar) in the United States of America and Canada, Pound in United Kingdom, Euro in European countries, Rupees in India. Hence, in order to maintain the balance of trading, the market has come to be known as Forex market, also known as Foreign Exchange Market. The foreign exchange rate is decided by this market. The rate determines man factors such as trading quantity, buying, selling exchanging of currencies in a certain fixed amount and many more. This rate keeps fluctuating on daily basis. It is similar to the fluctuations of stock market. Among the existing trading policies and types, Forex has established itself has the largest market in the world.
The major participants of the Forex market are from large international banks. The leading financial centres across the world participate in maintaining of this Forex transactions and changes continuously. There are multitude buyers and sellers around the globe. These currencies are always traded in pairs. Hence, the foreign exchange market does not maintain a fixed value for any particular type of currency. However, it determines on the basis of relative value of market price. The set value of one currency is paid with the currency of other. Usually the monitoring of the banks, takes place on 24 * 7 (24 hours and seven days basis). The values also help to maintain the national import and export amounts. Learn about the skuteczne strategie forex here.
How does Forex market run?
The foreign exchange market runs under various financial institutions. They operate under various levels and hierarchies. In the back of the curtain, the banks deal with small markets or financial firms who are known as dealers. These dealers get involved with large amounts of trading in foreign exchanges. These small financial firms are known as banks or “inter-bank market”. In this some countries leading insurance companies and many other types of financial sectors get involved in deciding the major change or major leap in the rates of foreign exchange. In most cases, the trading between people is on very large scale and involves hundreds of trillions of dollars or euros.
The international trading and foreign investments which are done depend on the foreign exchange market. These help to make accurate currency conversion. For instance, when United States of America wants to export goods from European country, there is a difference in the rate of currencies. The USA follows the Dollar and European Union member country follows Euro. Hence, in order to maintain direct speculation and evaluation of goods related to the value of currency, the trade occurs between the two at differential rate of interest in between the two currencies. In short, when a particular part purchases any goods or investments in one currency, they pay them through other currency with in the Forex regulations.
History of Forex:
The modern systems and rules of Forex have been formed during the year 1970’s. Under the Bretton Woods system of monetary management, they have set rules for commercial and financial relations within the world’s strongest monetary management system. The rules have been set after the World War II. Many countries gradually moved to floating exchange rates from the previous exchange rate regimes. These have been fixed as per Bretton Woods system. As of current policy and rules, the medium of Foreign Exchange of Trading is unbiased and from no intervention of leading central banks of rich and developed countries. However, the trading cost is slightly higher and commercialised.
Characteristics of Forex:
There are various characteristics of trading using Forex which makes it unique. The trading volume is abundant and hence, it represents the largest asset class in the world which leads to the highest liquidity level. The Forex is based on geographical dispersion. It maintains continuous operations – 24 hours through-out the weekdays. Most of the banks in the world have holidays on weekends; hence the trading takes place from 22:00 GMT on Sunday (Sydney time zone) till 22:00 GMT on Friday (New York time zone). The exchange rate does not depend on only one factor. There are number of factors that affect the exchange rates. When compared with other markets of fixed income, the low margins of Forex are relative.
Strategies of Forex Trading:
Many Forex traders develop a certain trading strategy which they begin by selecting something very simple. For example, they may choose a particular currency of certain country and pair it to another. This may tend to rebound for specific resistance level. Next, they may decide to add other elements, which improve the overall accuracy of trading signals over the period of time. This may require the rebounded price to maintain specific support level by maintaining a certain percentage. Traders should consider for developing their trading systems using software programs like MetaTrader. These software programs help to make automated trading. Additionally, these traders also help to back test the trading strategies, which have been performed in the past. These softare replace the paper trading. There are several different components that can affect the effective Forex Trading Strategy. Grab more knowhow about the skuteczne strategie forex before getting started.
- Making the selection of the market: Every trader who deals with financial foreign exchanges must determine their currency pairs on which they can perform trades. Sooner, they become experts at reading those currency pairs and doing trading.
- The sizing of the positions: the traders must determine how large each position can control the amount of risk which is taken for each individual trade.
- Maintaining the Entry Points: Each traders must decide up on the rules which are required for governing the amount of risk which is taken for individual trade. These entry points helps to decide when to enter the short term or long term position in a given currency pair.
- Exit points: the exit points are similar to the entry points. They also help to decide when to exit from the long position of the short term positions.
- Trading tricks: the tricks of trading vary among the players or participants. The traders have a certain sets of rules which determine how to buy and sell the currency pairs. Based on that, the execution technology is selected for right execution.