An overview to FOREX

The FOREX market is the largest in the world, where millions of dollars exchange hands (figuratively)throughout the day beginning in the New Zealand and over each time zone. It’s funny how hardly anybody except for the insiders can explain how this works with a straight face. Though every adult is aware of such a market, it is rare for one to be able to hold a casual conversation on same. This is due to the lack of its reach in to the general public due the complexity of its nature. In addition to figuring out how this all works there is also the issue of there being no physical operational Centre as there is in other markets.

The dominant participants in this market are the largeinternational banks and financial centers around the world that function as the facilitator of trading between a wide range of multiple types of buyers and sellers from around the world. The determining factor in the market is that no currency is set at a stand-alone value, as the whole idea behind the concept of a foreign ‘’exchange’’ market implies that the value is set in comparison to another currency that it is paid for with.

Forex companies in Australia are regulated by the ASIC – Australian Securities and Investment Commission and maintains an Australian Financial Services License (AFSL). There are required to ensure that all FOREX participants adhere to stern capital standards and creates internal procedures together with risk management, ongoing staff training, and a stringent accounting and auditing processes.

Traditionally the FOREX community was monopolized by the banking sector which used it to pump funds into commercial, hedging or speculative purposes. But with time the market has broadened into includefund and money managers and even small time players such as the individual retail trader.

WHAT IS FOREX TRADING?

In a nutshell, you pay in one currency to purchase another.in other words the rate at which they are exchanged expresses the relative value between the two currencies. The important point to grasp in the situation that money here is the commodity as it is the mode of transaction. The norm of the market is that most currencies (except the EURO and British pound) tend to be quoted against the dollar as most international transactions are executed in USD.

In a currency pair one is referred to as the ‘’dominant’’ as in most scenarios one exudes power over the other. This currency is the base currency and is the first indicated in a CCY pair. This is also the CCY that remains constant when determining the exchange rate between the two.

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