What is Forex? – genxfxtrader
The Forex market or foreign exchange, is a world market for foreign exchange. It is decentralized and counter: when a tourist in Tokyo buys dollars with yen, he makes a transaction on the FOREX market similar to what a multinational when converting million Euros in British Pounds.
Thus, this market is the largest in the world , with a trade volume that results in a highly liquid; also it is open 24 hours a day, except weekends.
Many market participants are simply limited to exchange a foreign currency for their own use, as companies that need to pay wages in those countries where they sell their products. But much of the market as currency traders are retail, speculating on the movements of the different exchange rates – similarly to those negotiating with changes in stock prices.
Fluctuations are caused by global macroeconomic conditions and events, and expectations of operators against these, as well as real money flows. The market is attractive for private investors since its volatility offers opportunities to generate profit (loss also, of course) , while there are standard tools to manage risk exposure. Another attraction is that forex brokers Forex allow investors to profit from their operations with low margin requirements.
In the Forex market, the currencies are traded each other in a “peer” , which are the contributions of the relative value of a unit of currency, the “base” against another currency, the “counterparty”. These are generally referred to by the link international 3 – letter codes that define each of the coins, the base is placed at the beginning, for example, EUR / USD indicates the ratio of the dollar euro US ..
As in any market, Forex is a difference between the purchase price and the selling price , known as the bid / offer range. This is expressed in terms of pips, the smallest price change a given exchange rate may experience – usually is one hundredth of a percent. In major currency exchanges, the difference between the price at which a buyer will buy ( “bid”) from a client and the price at which another sell ( “offer” or “demand”) is often between one and three pips.
The market is divided into levels of access : at the top is the interbank market, which is formed by the major commercial banks and stockbrokers; these groups often receive very narrow margins. Smaller banks and large multinational corporations are next, followed by foundations and investment management companies. Retailers, which are the next, participate indirectly through brokers or banks, and constitute a growing segment of the market because of the relative ease with which the Internet allows them to trade.