FOREX INTRODUCTION WHAT IS FOREX
FOREX INTRODUCTION WHAT IS FOREX? Forex, often abbreviated fx, is an acronym short for “foreign exchange” and is by far the largest financial market in the entire world. The forex markets see roughly 5 trillion USD of trade volume on a daily basis. Compare this to the stock market which sees roughly 20 billion USD of trade volume on any given day. Forex is the trading, or “exchanging” of different countries’ currencies. You will also commonly see various currencies exchanged for commodities or cryptocurrencies, and these exchanges are also included under the umbrella of the foreign exchange markets. Many people participate in the forex markets without realizing it. When you travel to another country, you must exchange your native currency for the currency of the country you are visiting at the current exchange rate so that you may purchase goods and services while you are there. When you are ready to return home, you will then exchange the currencies back again (this time at a different exchange rate) so that you return with your native currency. Congratulations, you have just participated in the forex financial markets!
WHO TRADES FOREX? There are many participants in the foreign exchange markets. We will detail those participants below: Individuals – We have already discussed an example of how regular, average people participate in the forex markets throughout their lifetime. While many individuals only exchange currencies when traveling, there are some who trade currencies to turn a profit. You will often hear these people referred to as “retail traders”. It is estimated that retail traders only account for a measly less than 5% of the overall trade volume in the foreign exchange markets. Corporations – Large companies trade quite often in the foreign exchange markets! Their participation has substantially increased over the previous years as we have seen a rise in international business and a widespread adoption of more open, global economic policies. In fact, it’s not uncommon for a large corporation to reference and analyze the exchange rate for goods and services before carrying out transactions. Banks – Average banks combine to account for more trading volume in the foreign exchange markets than any other entity. Most of these exchanges take place in the interbank market where banks conduct currency exchanges with one another electronically. There are many reasons why banks participate in the forex markets, but note that your bank does also trade your money in the forex market for financial gain! Institutional Investors – Another significant source of transactions in the forex markets, institutional investors such as hedge funds control substantial equity in the private sector and typically carry out a sizeable portion of their portfolio’s positions in the forex markets. Governments – Typically, governments participate and influence the foreign exchange markets via entities called central banks. Central banks have an incredible influence in the forex markets as they control a nation’s interest rates which directly impact supply & demand for a currency and, therefore, that currency’s exchange rate. These central bank entities also employ impactful economic tactics to stabilize their respective currencies between the constant inflation – recession continuum. So, as you can see there are quite a bit of participants in the foreign exchange markets and this is what contributes to the incredible amount of money being traded on any given day. We will go into further detail regarding all of these market participants and the overall structure of the foreign exchange markets in a later section. RETAIL TRADERS In the past, the forex markets weren’t very accessible for average individual traders, however the world is changing and it’s changing fast. Globalization, technology advancements, economic and financial fundamental changes in society, and an overall shift in the way people are living their lives have opened up access to and increased the popularity of retail trading. Tradera is newbie friendly trading system that will teach you how to trade Forex and Crypto Currency from A to B with live trading seccesions. Go here for more information