An Insight into Forex
The term forex is an acronym that stands for foreign exchange and connotes the trading of currencies of different countries in the international market. The forex market is an extremely volatile arena and a decentralized institution. It rose as a result of the breakdown of the gold standard (an important unit of exchange) in the early 1970s because of its inflexibility.
The Forex market is made up of a list of participants that are essentially banks (central / commercial banks), governments, MNCs (multinational corporations), institutional investors and hedge fund. Private individuals like the common man also feature in the list.
The trade of currency involves the buying of the currency of one country and selling another at the same time- the currencies are trades against each other. So it is always traded in pairs. The idea of forex trading is somewhat similar to that of buying stocks, shares, debentures, etc. The main objective of doing forex trading, which goes without saying, is to make money through the process.
The market is flooded with several forex brokers to help you deal with the buying and selling of currencies. They get their share / commission for rendering services and earns through the bid-ask spread method – the broker keeps the difference in price (between the ask price and bid price) for the currency that gets traded as a part of his compensation. Some of the renowned brokers are pfgbestforex, Citifxpro, Avafx etc.
The exchange rate plays a pivotal role in forex trading. The exchange rate of a particular currency against that of others reflects the condition of the country's economy if placed on a table of comparison with the other countries' economies and where it stands. This also means that the value of the certain currency is a strong indication of what the global market thinks of the country’s economy (the currency belongs to), today and later on.
The forex market is a market that never sleeps, it remains open and transactions take place 24 hours 365 days a year- only the market in a particular region closes and the other one opens, and some markets are open simultaneously allowing dynamic foreign exchange to take place. It is greatly monitored by the news and events taking place worldwide which in turn affect the appreciation and depreciation of currencies around the world.
The most traded currency is the US dollar which is denoted by USD and the three most important regions of the forex market are Australasia, Europe and North America.
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