What Is the Forex Market?
The currencies are traded in the foreign exchange market. Everyone around the world gives a lot of importance to currency. For foreign trade and business, these currencies need to be exchanged. Foreign exchange is also known as forex trading. The foreign exchange market is a globally decentralized or over-the-counter (OTC) market for the trading of various types of currencies. This market determines foreign exchange rates for every currency. It includes all aspects of selling, buying, and exchanging currencies at current or determined prices. In terms of trading volume, it is by far the largest forex market in the world, followed only by the credit market.
Let me tell you the main participants in this particular market
1) Many larger international banks
2) Financial centers around the world
They function as pillars of trading between a broad range of various types of buyers and sellers around
the clock.
One of the special aspects of the international market is that there is no central marketplace for foreign exchange. Here the currency trading is carried electronically over-the-counter (OTC), which means that all transactions will occur via computer networking between traders all across the globe. This market is always open 24 hours, five and a half days a week. The currencies are traded all over the world in almost all financial centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris, and Sydney—You will find it across every time zone. Different time zones everywhere in the world mean when one trading day ends at a place, another is beginning somewhere else with a time difference. Remember, the forex market can be remarkably active any time of the day as its price quotes keep changing constantly.
A Brief History of Forex
If we see the stock market, its root can be traced back to centuries. But, forex as we see and understand today is a new market. The basic explanation is that in forex people are converting one currency to another for their financial advantage. Forex has been around since nations began minting currencies. But these modern forex markets are modern inventions. After the Bretton Woods accord in 1971, many major currencies were allowed to float freely against each other. The values of individual currencies differ, which gives the rise to the need for foreign exchange services and trading.
In the forex market, most of the trading is done by Commercial and Investment banks on behalf of their clients. But, this does not deny the fact that there is a massive opportunity for individual and professional investors. These days with a little help from the internet, the emergence of a retail market aimed at individual traders has taken place which helps by providing easy access to the foreign exchange markets. Either by the help of the banks themselves or brokers making a secondary market. Most online brokers or dealers offer very high leverage to individual traders who have the ability to control a large trade with a small account balance.
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