here are many markets: The market is open 24 hours a day
markets for stocks, which allows you to design your
futures, options and trading hours around your daily
currencies. These are probably commitments. It is very volatile,
the most accessible markets for which is great for those people
everyday traders like you and I. who are looking for day-trading
People easily understand the opportunities.
basics of trading shares, so I
will occasionally use examples The foreign exchange market is
from that market. the market in which currencies
are bought and sold against one
I began trading shares first and another. People may loosely refer
then I moved on to trading to this market under different
currencies; therefore, most of labels, including foreign
the examples I will be using in exchange market, forex market, fx
this book are derived from market or the currency market.
trading currencies.
The foreign exchange market is
If you do not know a lot about the largest market in the world,
currency trading, allow me to with daily trading volumes in
introduce it to you. It is what I excess of $1.5 trillion US
trade and I believe that it is dollars. All transactions
one of the best markets to trade involving international trade and
because of its efficiency. The investment must go through this
transaction costs to execute a market because these transactions
trade are minimal and most involve the exchange of
brokers provide you with the currencies.
tools and data you need to make
your trading decisions, they It is the most perfect market
usually provide them for free. that exists because it has a
large number of buyers and weekends.
sellers all selling the same
products. There is a free flow of THE MAIN ‘PLAYERS' IN THE FOREX
information and there are little MARKET
barriers to participate.
The five broad categories of
The currency exchange market is participants are: consumers,
an over-the-counter (OTC) market businesses, investors,
which means that there is not one speculators, commercial banks,
specific location where buyers investment banks and central
and sellers can actually meet to banks.
exchange currencies. Instead,
transactions are conducted by Consumers, including visitors of
phone, fax, e-mail or through the countries, tourists and
websites of brokers who immigrants, do need to exchange
specialize in currency trading. currencies when they travel so
that they can buy local goods and
The major dealing centres at the services. These participants do
time of writing are: London , not have the power to set prices.
with about 30% of the market, New They just buy and sell according
York , with 20%, Tokyo , with to the prevailing exchange rate.
12%, Zurich , Frankfurt, Hong They make up a significant
Kong and Singapore , with about proportion of the volume being
7% each, followed by Paris and traded in the market.
Sydney with 3% each. Because of
the fact that these centres are Businesses that import and export
all over the world, foreign goods and services need to
exchange traders can execute exchange currencies to receive or
transactions 24 hours a day. The make payments for goods they may
market only closes on the have bought or services they may
have rendered. exchange rate that the buyer is
willing to buy and the offer
Investors and speculators require price is the exchange rate at
currencies to buy and sell which the seller is willing to
investment instruments such as sell. The difference is called
shares, bonds, bank deposits or the bid-offer spread. They also
real estate. make profits from speculating
about whether the exchange rate
Large commercial and investment will rise or fall.
banks are the ‘price makers'.
They are the ones who buy and Central banks participate in the
sell currencies at the foreign exchange market in their
bid-and-offer exchange rates that effective duty as banks for their
they declare through their particular government. They trade
foreign exchange dealers. currencies not for the intention
of making profits but rather to
Commercial banks deal with facilitate government monetary
customers on one hand, and with policies and to help smoothen out
the Interbank or other banks, on the fluctuation of the value of
the other hand. They profit by their economy's currency.
utilizing the bid-and-offer
spread. The bid price is the
About the Author:
Marquez Comelab is the author of the book: The Part-Time Currency Trader. It's a guide for individuals interested in trading currencies in the forex market. See: http://marquezcomelab.com and http://thefreedomtochoose.com for more.
Source: www.isnare.com
