Forex Tutorial: What is Forex Trading?
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The foreign exchange market is the "place" where currencies are traded. Currencies are important 4x trading online most people around the world, 4x trading online they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business.
If you are living in the U. This means that the U. The same goes for traveling. A French tourist in Egypt can't pay in euros to see the 4x trading online because it's not the locally accepted currency.
As such, the tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate. The need 4x trading online exchange currencies is the primary reason why the forex 4x trading online is the largest, most liquid financial market in the world. It dwarfs other markets in size, even the stock market, with an average traded value of around U.
The total volume changes all the time, but as of Augustthe Bank for International Settlements BIS reported that the forex market traded in excess of U. One unique aspect of this international market is that there is no central marketplace for foreign exchange. Rather, currency trading is conducted electronically over-the-counter OTCwhich means that all transactions occur via computer networks between traders around the world, rather than on one centralized exchange.
The market is open 24 hours a day, five and a half days a week, 4x trading online currencies are traded worldwide in the major 4x trading online centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney - across almost every time zone. This means that when the trading day in the U. As such, the forex market can be extremely active any time of the day, with price quotes changing constantly. Spot Market and the Forwards and Futures Markets There are actually three ways that institutions, corporations and individuals trade forex: The forex trading in the spot market always has been the largest market because it is the "underlying" real asset that the forwards and futures markets are based on.
In the past, the futures market was the most popular venue for traders because it was available to individual investors for a longer period of time. However, with the advent of electronic trading and numerous forex brokersthe spot market has witnessed a huge surge in activity and now surpasses the futures market as the preferred trading market for individual investors and speculators.
When people refer to the forex market, they usually are 4x trading online to the spot market. The forwards and futures markets tend to be more popular with companies that need to hedge their foreign exchange risks out to a specific date in the future.
What is the spot market? More specifically, the spot market is where currencies are bought and sold according to the current price. That price, determined by supply and demand, is a reflection of many things, including current interest rates, economic performance, sentiment towards ongoing political situations both locally and internationallyas well as the perception of the future performance of one currency against another.
When a deal is finalized, this is known as a "spot deal". It is a bilateral transaction by which one party 4x trading online an agreed-upon currency amount to the counter party and 4x trading online a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known 4x trading online one that deals with transactions in the present rather than the futurethese trades actually take two days for settlement.
What are the forwards and futures markets? Unlike the spot market, the forwards and futures markets do not trade actual currencies. Instead they deal in contracts that represent claims to a certain currency type, a specific price per unit and a future date for settlement. In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves. In the futures market, futures contracts are bought and sold based upon a standard size and settlement 4x trading online on public commodities markets, such as the Chicago Mercantile Exchange.
Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized. The exchange acts as a counterpart to the trader, providing clearance and settlement. Both types of contracts are binding and are typically settled for cash for the exchange in question upon expiry, although contracts can also be bought and sold before they expire.
The forwards and futures markets can offer protection against risk when trading currencies. Usually, big international corporations use these markets in order to hedge against future exchange rate fluctuations, but speculators take part in these markets as well.
Note 4x trading online you'll see 4x trading online terms: FX, forex, foreign-exchange market and currency market. These terms are synonymous and all refer to the forex market. Introduction to Currency Trading Forex Tutorial: What is Forex Trading?