What is forex?
Briefly, forex is the exchange market. If try to give more specific definition, it will sound like, it is the international currency market forex (forex – Foreign Exchange Market) – a set of operations on purchase and sale of a foreign currency and loans extension on specific conditions (sum, exchange rate, interest rate) which should be completed at specified date. Another indication of the exchange market is FX.
Currency trading has become the most common type of activity: up to four trillion dollars a day reaches a turnover on the global currency market forex, not less than 80% of all deals compose operations, which main target is to profit from the game on the difference in exchange rates. This game on the forex market attracts many participants: both financial organisations and individual investors, because according to experts, competent trader can get more than 1.000.000 dollars a year in salary and commission.
What drives the forex market.
The main moving factor on the forex market is the movement of capital between states. The state is always behind the back of the national currency. Other factors which influence on the exchange rate on the forex market is the balance of mutual payments, condition of national economics, predictions which are made on the basis of charts and technical analysis, as well as political and psychological factors. Price movements on the currency market do not stop even for a minute. Thus, on forex market in order to make a profit, you may make use of dozens of situations each day.
Influence of private traders on price range quotations of currency pairs are changed depending on a total sales result and purchase amount of different currencies. If to consider a simple example, then it will look like this: You go to a bank, sale the US dollars and buy euros on these money. Before you have completed the exchange, bank had 50% of dollars and euro in reserve. After you completed the operation of buying and selling the currency, the proportions of bank’s reserves changed and so the bank appeared to have more US dollars, because you had sold dollars to the bank and consequently fewer euros since you bought euros at the bank. As the result the bank bears risks which are concerned with a decrease in the dollar’s rate, in the amount exceeding the established proportion. That’s why the bank refers to a contractor and by means of an electronic auction sells surplus of dollars and buy euros, thus restoring the necessary balance.
This is exactly the way how to build relations on the forex market, some sell, others are buying and if the proposals for the purchase of a currency becomes more, in accordance with the principle of the market economy, the rate of the currency rises. In such a manner trends appear. Along with the organisations for which the participation on the foreign exchange market is a necessity, as in the case with the above mentioned example, there exist investment hedge funds and private traders, who trade on forex and earn hard cash and for them the exchange is just a way to get a money. The prime part of huge capitals in the world have been received exactly by the mean of stock exchange.
Today most of the investors who want to trade on the currency market understand that Forex investment trading is a tough job. For this reason online Forex investment is often done via trading account management. Want more info about Forex investment online and account management – please visit this site.
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