Forex Tutorial: What is Forex Trading?

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The foreign exchange market is the "place" where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need forex online trading be exchanged in order to conduct foreign trade and business. If you are living in the U. This means that the U. The same forex online trading for traveling.

A French tourist in Egypt can't pay in euros to see the pyramids because it's not the locally accepted currency. As such, the tourist has to exchange the euros for the local forex online trading, in this case the Egyptian pound, at the current exchange rate.

The need to exchange currencies is the primary reason why the forex market is the largest, most liquid financial market in the world. It dwarfs other markets in size, even the stock market, with an average traded forex online trading of around U. The total volume changes all the time, but as forex online trading Augustthe Bank for International Settlements BIS reported that the forex market traded in excess of U.

One unique aspect of this international market forex online trading that there is no central marketplace for foreign exchange. Rather, currency forex online trading is conducted electronically over-the-counter OTCwhich means that all transactions occur via computer networks between traders around the world, rather than on one centralized exchange. The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney - across almost every time zone.

This means that when the trading day forex online trading the U. As such, the forex market can be extremely active any time of the day, with price quotes changing constantly. Spot Market and the Forwards and Futures Markets There are actually three ways that institutions, corporations and individuals trade forex: The forex trading in the spot market always has been the largest forex online trading because it is the "underlying" real asset that the forwards forex online trading futures markets are based on.

In the past, the futures market was the most popular venue for traders because it was available to individual investors for a longer period of time.

However, with the advent of electronic trading and numerous forex brokersthe spot market has witnessed a huge surge in activity and now surpasses the futures market as the preferred trading market for individual investors and speculators.

When people refer to the forex market, they usually are referring to the spot market. The forwards and futures markets tend to be more popular with companies that need to hedge their foreign exchange risks out to a specific date in the future. What is the spot market? More specifically, the spot market is where currencies are bought and sold according to the current price.

That price, determined by supply and demand, is a reflection of many things, including current interest rates, economic performance, sentiment towards ongoing political situations both locally and internationallyas well as the perception of the future performance of one currency against another. When a deal is finalized, this is known as a "spot deal".

It is a bilateral transaction by which one party delivers an agreed-upon currency amount to the counter party and receives a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known forex online trading one that deals with transactions in the present rather than the forex online tradingthese trades actually take two days for settlement. What are the forwards and futures markets?

Unlike the spot market, the forwards and futures markets do not trade actual currencies. Instead they deal in contracts that represent claims to a certain currency type, a specific price per unit and a future date for settlement.

In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves.

In the futures market, futures contracts are bought and sold based upon a standard size and settlement date on public commodities markets, such as the Chicago Mercantile Exchange. Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized.

The exchange acts as a counterpart to the trader, providing clearance and settlement. Both types of contracts are binding and are typically settled for cash for the exchange forex online trading question upon expiry, although contracts can also be bought and sold before they expire.

The forwards and futures markets can offer protection against risk when trading currencies. Usually, big international corporations use these markets in order to hedge against future exchange rate fluctuations, but speculators take part in these markets as well.

Note that you'll see the terms: FX, forex, foreign-exchange market and currency market. These terms are synonymous and all refer to the forex market.

Introduction to Currency Trading Forex Tutorial: What is Forex Trading?

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It is definitely a revolution in the digital currency area because it can be transferred from one owner to another privately and without the use of a middle man.

In terms of volatility, it is probably the most volatile product and thus was an excellent opportunity for Brokers to offer it as a trading product.