The forex market is actually a worldwide decentralized or virtual over-the-Counter network for the trading of various currencies. This marketetermines international exchange rates for each currency. It includes all aspects of purchasing, selling and trading currencies in current or pre-determined prices.
Like the stock market, the forex market has also been widely recognized as a means for investors to make a profit by taking advantage of fluctuations in a given currency’s value. The former is simply the currency equivalent of a stock and is traded on a trading network, just like shares are traded on the stock market. The two major elements of forex trading are currency interest rates and forex futures, which are both futures contracts which allow one party to pay an interest rate in return for a specific amount of time and a specific date (the time and date are specified by the contract).
Currency interest rates refer to the changes in exchange rates between a certain country or entities and another. The difference is primarily due to the differences in foreign debt and foreign equity. Forex traders try to predict how these rates will affect the value of a particular currency pair. Another element of forex trading is to buy and sell the foreign exchange based on speculation. In recent years, the use of software tools and automated forex trading systems have been introduced to help reduce the risks involved while conducting more transactions in the global marketplace.
A trader’s trading portfolio usually consists of one or more base currencies and one or more long positions. The long position, also known as the Eurodollar, US dollar and Canadian dollar variants, are used to speculate in a particular currency. A short position is the opposite of the long position. It represents the opposite of the current asset and liabilities. Traders use various strategies and techniques in order to gain an advantage over others in the long position or in the short position.
Forex trading currency pairs such as the EUR/USD (eenyuan) and the USD/CAD (Canadian dollar) are traded on the Over the Counter Bulletin Board (OTCBB), which is one of the two international markets for derivatives. On the OTCBB, traders can trade forex futures, forward contracts and swap agreements. These Forex trading currencies are paired with similar pairs on the main exchange.
Forex is the largest financial market in the world, trading over $1 trillion per day. The Forex market keeps most of its profits in the hands of a small number of large banks. Large corporations and speculators also make money from the Forex market. This means that for small investors, forex trading currencies offers a high liquidity, high profit potential and a fast return on investment. The Forex market is open round the clock and available to all investors interested in making quick money.