If everyone in the world used the same currency, there would be no need for a foreign currency exchange market or foreign exchange rates. However, our world consists of several national currencies and as individuals or companies from one country trade across borders, the need for foreign currency arises. For example, when a U.S. importer buys French wine, either the importer needs Euros to pay the French merchant or the French merchant must accept US Dollars and then convert them to Euros.
The (spot) FOREX, a global market where trades are transacted immediately at current market price, plays a key role in transferring financial payments across borders and moving funds and purchasing power from one currency to another. This international market has played an extensive and direct role in national economies and has a major impact that affects our lives and our prosperity. The movement of different currencies between countries determines a very important price: the exchange rate. It is the exchange rate that allows the currencies to be traded for profit.
The Foreign Exchange is not traded on a physical exchange like the stock market. It is traded via the telephone or through the Internet. This electronic structure has contributed to making the FOREX the largest marketplace in the world. With over $1.5 trillion dollars traded per day versus $25 billion per day traded on the New York Stock Exchange (NYSE), the Foreign Exchange market offers many trading opportunities due to the low cost of executing the transactions and the speed at which the execution occurs. The (spot) FOREX market is open 24 hours a day, six days a week, Sunday evening through Friday afternoon.
Virtually all large institutions and professional traders conduct most of their Foreign Exchange dealing in the (spot) FOREX market. The (spot) FOREX market pairs together currencies from different countries and quotes them according to the values of the respective currency.
The (spot) FOREX market has extremely low margin rates as compared to those of the NYSE. FOREX market brokers offer margin rates anywhere from as low as 1% to 2%. At a 2% margin rate, you can trade $2,000 in a margin account and control $100,000 in currency exchange trading capacity. But you must be careful, the leverage can be a double-edged sword and without proper risk management and tools, the market can move against you resulting in the loss of your trading capital.
Most brokers in the (spot) FOREX do not charge a commission. Instead, they are compensated by the difference between the bid and the ask:• Bid – what the trader sells at and what the market buys at• Ask – what the trader buys at and what the market sells atThe difference between the bid and the ask is called the spread. Be sure to read the broker’s disclosure statement; some of them charge transaction fees or ticket charges.Market HoursThe spot FX market is unique to any other market in the world, as trading is available 24-hours a day. Somewhere around the world, a financial center is open for business, and banks and other institutions exchange currencies, every hour of the day and night with generally only minor gaps on the weekend. Essentially foreign exchange markets follow the sun around the world, giving traders the flexibility of determining their trading day.
How market hours work:
Time Zone New York GMT
Tokyo Open 7:00 PM 0:00
Tokyo Close 4:00 AM 9:00
London Open 3:00 AM 8:00
London Close 12:00 PM 17:00
NY Open 8:00 AM 13:00
NY Close 5:00 PM 22:00
Market Participants
Until recently, the Forex market wasn't accessible to the retail trader or individual speculator. With the large minimum transaction sizes and often-stringent financial requirements, banks, hedge funds, major currency dealers and the occasional high net-worth individual speculator were the principal participants. These large traders were able to take advantage of the many benefits offered by the Forex market versus other markets - including vast liquidity, 24-hour market access, and the strong trending nature of the world's primary currency exchange rates.
The (spot) FOREX, a global market where trades are transacted immediately at current market price, plays a key role in transferring financial payments across borders and moving funds and purchasing power from one currency to another. This international market has played an extensive and direct role in national economies and has a major impact that affects our lives and our prosperity. The movement of different currencies between countries determines a very important price: the exchange rate. It is the exchange rate that allows the currencies to be traded for profit.
The Foreign Exchange is not traded on a physical exchange like the stock market. It is traded via the telephone or through the Internet. This electronic structure has contributed to making the FOREX the largest marketplace in the world. With over $1.5 trillion dollars traded per day versus $25 billion per day traded on the New York Stock Exchange (NYSE), the Foreign Exchange market offers many trading opportunities due to the low cost of executing the transactions and the speed at which the execution occurs. The (spot) FOREX market is open 24 hours a day, six days a week, Sunday evening through Friday afternoon.
Virtually all large institutions and professional traders conduct most of their Foreign Exchange dealing in the (spot) FOREX market. The (spot) FOREX market pairs together currencies from different countries and quotes them according to the values of the respective currency.
The (spot) FOREX market has extremely low margin rates as compared to those of the NYSE. FOREX market brokers offer margin rates anywhere from as low as 1% to 2%. At a 2% margin rate, you can trade $2,000 in a margin account and control $100,000 in currency exchange trading capacity. But you must be careful, the leverage can be a double-edged sword and without proper risk management and tools, the market can move against you resulting in the loss of your trading capital.
Most brokers in the (spot) FOREX do not charge a commission. Instead, they are compensated by the difference between the bid and the ask:• Bid – what the trader sells at and what the market buys at• Ask – what the trader buys at and what the market sells atThe difference between the bid and the ask is called the spread. Be sure to read the broker’s disclosure statement; some of them charge transaction fees or ticket charges.Market HoursThe spot FX market is unique to any other market in the world, as trading is available 24-hours a day. Somewhere around the world, a financial center is open for business, and banks and other institutions exchange currencies, every hour of the day and night with generally only minor gaps on the weekend. Essentially foreign exchange markets follow the sun around the world, giving traders the flexibility of determining their trading day.
How market hours work:
Time Zone New York GMT
Tokyo Open 7:00 PM 0:00
Tokyo Close 4:00 AM 9:00
London Open 3:00 AM 8:00
London Close 12:00 PM 17:00
NY Open 8:00 AM 13:00
NY Close 5:00 PM 22:00
Market Participants
Until recently, the Forex market wasn't accessible to the retail trader or individual speculator. With the large minimum transaction sizes and often-stringent financial requirements, banks, hedge funds, major currency dealers and the occasional high net-worth individual speculator were the principal participants. These large traders were able to take advantage of the many benefits offered by the Forex market versus other markets - including vast liquidity, 24-hour market access, and the strong trending nature of the world's primary currency exchange rates.
No comments:
Post a Comment