Learning about Forex Trading
What is Forex Trading? Forex means the Foreign Exchange Marketplace where you can trade currencies. In order to conduct trade and business, currency needs to change hands. Let us take an example. Suppose you are living in India and want to purchase a perfume from France. So either you, or the company that you buy the perfume from is compelled to pay France in Euros and it would be considered as an import.
It implies that in order for the exchange to take place the Indian importer of the perfume has to exchange the equivalent amount of Rupees into Euros. Similarly, your local currency is of no use there as it will not be accepted, you need to convert your currency based on the prevalent exchange rates and that is done via Forex if you’re travelling abroad. Actually the largest marketplace you can ever find in the world is the Forex market. Several times over the currency market eclipses the stock exchange market.
What does exchange rate mean?
You pay the price of a single unit of a particular foreign currency in your own currency when you exchange currencies. The exchange rate for that currency in your country is the amount of money in your currency which is equal to a single unit of the currency in question.
Why is Forex so important?
The daily trading in Forex is estimated to be at a staggering amount of $5 Trillion each day if we take statistics into account. With the most liquidity among any financial marketplace, beating stock exchange trading to a sorry second place this fact alone makes it the biggest market. As all foreign exchange control methods were cast off in the country this happened in 1979. And to induce currency trading there was also a very good infrastructure.
In creating greater demand for services as well as goods and accessing resources previously untapped these imports/exports in turn will help. Your prospects would be quite limited and hinder growth if you were the head of a multi-national company. This leads to a stagnation or slowdown in the global economy. You must learn how to trade FX efficiently.
Major players in Forex
• Banks: The biggest banks in the world all depend on Forex trading for a large part of their business. They also ease Forex transactions for customers and indulge in speculative trading from trading desks.
• Central Banks: These are major players in Forex markets. The open market operations as well as the policies of interest rate play a big part in influencing currency rates. I say this because by increasing or stabilizing the economy any actions taken by the central bank will act in the interests of the nation.
• Investors/Hedge funds: In order to bulk up endowments and pension funds you’ll find a lot of investors trading currencies. Also, at times hedge funds may indulge in speculative trades.
• Corporations: To ease and facilitate transfer of goods as well as services those firms engaged in import and export will have to rely on Forex.
• Individuals: Whoever after consultation or research, decide to try their hand at Forex the Forex market gains popularity by the day among the gentry.
Forex opportunities for you
You can jolly well give it a try if you have not tried your hand at Forex yet. All you need is a sound geo-political knowledge, coupled with some latest feeds on the exchange rates. This is because the exchange rates are dependent on many factors like rate of interest, flow of trade, the volume of tourism, economy of the country, and a lot of other factors.