A Multi-Trillion Dollar Marketplace

The foreign exchange market (Forex) is really the biggest exchange in the world. The amount of U.S. dollars on the forex market on a daily basis is in the trillions. Most of these foreign exchange trading takes place between the big banks, central banks, currency speculators, multinational corporations, governments and other financial markets and institutions. However, individual dealers, to the mixture, with Internet discount brokers like Etrade to participate in the currency exchange market.

There is no central exchange or meeting place for the Forex. All trade is done through computer networks between merchants in different parts of the world. Also, unlike the stock exchange, the foreign exchange market is open 24 hours a day, because it is a global market. A trader in Hong Kong can exchange currency with a distributor in Australia, while an American dealer asleep.

There are several markets within the forex exchange traffic. First, there is the spot market. The spot-market deals with trade, the current values of the currencies. One person trades a certain amount of currency with another trader in exchange for an equivalent amount from another foreign currency. Spot trading, two days for a settlement.

The other two types of foreign exchange markets are the forward and futures markets. In the forward market, the buyer and seller agree on an exchange rate and timing of a transaction is responsible for a particular time in the future, at which point the trade is executed, regardless of what the prices are at this time. On the futures market, futures contracts are bought and sold based on a standard contract size and maturity. Futures trading on the public commodity markets.

A currency quote listed is different from a stock quote. Stocks are in terms of price per share. Currency exchange rates are listed as either direct or indirect quote quote. A direct quote uses the domestic currency as a base and foreign currency as the quote. An indirect quote does the exact opposite.

So, if you were a quotation in an American newspaper said that USD / JPY = 75, that would be a direct quote and would mean that $ 1 of the U.S. currency in the amount of 75 Japanese yen. If the same quote appeared in the same American newspaper and was JPY / USD = 0013, that would be an example of an indirect quote.

As with stock prices, currency exchange rates have a bid and offer prices to be spreading. The current bid is the amount of foreign currency that someone is willing to spend to buy $ 1 U.S. base currency. The letter is the amount of foreign currency that someone requires ready to sell $ 1 U.S. base currency.

The forex markets are generally considered less volatile than the stock market then, because in the course of a trading day, it is highly unlikely that the value of a single currency to pull that all much. In a share, it is not uncommon for a dealer to buy a share, and then a negative press release causes the stock to lose significant value within a day or even a few hours. Sometimes, however, the Forex is subject to fluctuations. If there is a significant economic or political development with a specific country, the currency of that country can quickly lose value.

It is a higher degree of liquidity on the exchange office then there is at the stock exchange because the exchange office is open 24 hours per day and because the nature of the exchange office is to bet on when certain currencies up or down, so it is easy to sell your position in a particular currency, even if the value of this money is going. A descent camp is more difficult to unload, but not impossible.

If you want to start tranding currency, try to make some money aside and open an account with an online broker. Start slowly, as it depends on how your work up to larger stores and higher volume. He did not play your nest egg on currency trading because inexperienced traders can lose everything they have quite fast, despite the relative safety of the Forex market.