Introduction
Forex exchange is the acronym of Foreign Exchange which means the trade of different countries’ currencies. If we take the example of Europe and United States, Europe has the currency of Euro and United States has the currency of United States Dollar. If we buy the Euro while we sell the US Dollar then it is called Forex Exchange. The forex exchange is being started from 1970s.
A broker or market maker is the person who does the Forex Trading. Traders use the brokers to place their orders and then those orders are placed in Inter Bank market. You can have any currency and then change the value of that currency being a forex trader. If you buy the Euros and then you may convert it into the USD easily. If we have 1,000 Euros in 2005 then we can convert it into USD which will be $1,200. You can gain the profit of $100 if you sell them in the end of year.
History
World currencies are changed into other currencies in currency trading market which is also known as multi trillion dollar market.
There are certain reasons of changing currency values:
- Reaction to some economic or political news
- Driven by speculators
- Driven by international business flows
If made-in-Europe products are imported by US then they would like to convert the USD into Euros for the payment of the products. If large quantities are being imported in short time then the demand for Euros increases.
Features
There are many risks in Forex Exchange. As compared to other markets the currencies are tend to be very volatile. You should use risk management for Forex Exchange. There should be effective currency risk management. Individual retail investors, financial institutions, business corporations trade the currencies. International currencies are exchanged in Forex Exchange market for the sake of global decentralization. In forex exchange market the world wide exchange venue of currency is done. The services and products are exchanged and flow in and out of the national borders is done. One can buy a currency of one country by paying another currency.
According to the Bank for International Settlements, the global forex exchange market was at $3.98 trillion. That break down is spot transactions ($1.490 trillion), outright forwards ($475 billion), foreign exchange swaps ($1.765 trillion), currency swaps ($43 billion), options and other products ($207 billion).
There are some of the factors which affect the exchange rates and they are the margins of profit which are considered to be low as compared to the markets having fixed income and to enhance the margins of profit or loss, leverage is used.
Tips and comments
There are certain mistakes which may occur in Forex trading. Search of Holy Grail is useless. If the person has the fear of loss then he should think on this phrase. If there are high risks then there is more possibility of having profit. You should apply fundamental and technical analysis. You should not only rely on money management. You should forecast the direction of market. You should see the technical indicators. You should make the strategies for the money management. You can get the profit from the management.
