A dedicated platform for trading currencies is the foreign exchange market. One of the most important needs for the people around the world is currency. Whether the importance of currencies is known to each single individual out there or not, they do exchange currencies.
It may be for varied trading purposes. Especially, if you are living in the USA, and interested to buy something from France, then you need to pay in the French currencies to buy your product or you have to pay in Euros. It means those who are going to import products into the USA will have to pay the price as equivalent of United States dollars. When you are going to travel, you need to exchange your US dollars currency into Euros, or French currency. For example, if a French tourist is going to visit Egypt then he cannot pay the Euros to the tour operator.
The foreign currency like Euros is not accepted in this part of the world. Therefore, the tourist has to exchange the local currency into Egyptian pounds before he travels to Egypt. The amount of money that the traveler gets as equivalent for his French currency is based on the currency exchange rate for that hour. Therefore, the basic need to exchange currency is one of the most important reasons why the market for Forex trading is quite colossal. It is renowned as the liquid financial markets around the globe. The stock market has an average trade value of about 2,000 billion US dollars in a day. Of course, the total volume is going to change every single minute.
The BIS or the bank of international settlements reports can tell you precisely about the forex market exchanges happening in the USA. It amounts to about 4.91 trillion US Dollars per day. There is no centralized Marketplace for the foreign exchange market and it is a unique aspect about this International trading market. Comparatively the currency trading is often conducted electronically. It means all the transactions are happening with the help of computerized networks between the different types of Global Traders.
Therefore, that is not one centralized exchange Centre but it is over the counter electronic trading facility for foreign exchange currencies. The market is completely opened all throughout the day and night. You can trade almost for five and half days in a week. You can see all the currencies of the world to be traded in all the important financial centers. The financial centers of trading are located in Sydney, Paris, Singapore, Hong Kong, Frankfurt, New York, Tokyo and London. So, across all the time zones, the trading is happening all throughout the day and night.
It means when the trading in the American part of the world ends, then the forex market trading starts completely new in the other part of the world like Hong Kong and Tokyo. Similarly, the active forex market comes up with different price quotes, which is constantly changing all throughout the day and night. So, there are three ways that the industrial firms and organizations can keep track of the trading Forex.
The Forex trading that is related to the smart market is always the biggest market compared to the other options. It is where the underlying real assets for the future as well as the Forward Market are completely relying upon. Before it used to be the future market that was very prominent among the traders. It was completely available to the individual investors for long periods. However, with the latest advancements in the field of electronic trading facilities and the constantly increase in the number of Forex trading brokers, the growth of spot market has scaled leaps and bounds. This magnanimous advancement and prominence in the spot market activity has now surpassed the future markets also. This is the most preferred trading market for the speculators and the individual investors. So in general, when people refer to the forex market, then most of the time it is referred to the spot market. When it comes to company references, the future and forward markets tend to be most prominent. The foreign exchanging risks have to hedge their future specific dates that can be easily tackled by the corporate companies in that way.
The forward and future markets trade with the actual currencies. Whereas the spot market is dealing with the contracts. The contracts will represent asset and specific currency type alone. It is the price per unit and date of future settlement corresponds to that price. Whereas in the case of Forward markets, it is possible to sell and buy contracts based on the OTC, regulations between the parties involved. That determines the terms of agreement between the parties. In case of the futures market, the future contracts are being purchased and sold only based upon the standard sizes corresponding to the settlement date for that public commodities market.
The best example is the Chicago mercantile exchange. If you are taking into consideration of the national futures, Association in the USA than that is the regulatory authority for the futures market in the country. The specific details in the futures contracts will include the traded units and the settlement dates as well as the delivery dates. The minimum price increased per hour is not possible to be customized. The exchanges act as the trader’s counterpart by providing the needed settlement and clearance.
Even in this type of contracts binding is there. Yes, it is typically settled for exchange of currencies with claims, on the expiry of the contracts. You need to buy and sell contracts before the date of expiry. The needed protection against currency trading risks is provided by the future in the forward markets. Generally as a routine, the big multinational corporations will use this forex and forward markets in order to hedge against the future exchange rates, which can fluctuate.
At the same time, the speculators are also going to take part in these future and forward markets. When you are going to trade in this market, you have to note down the important terms like foreign exchange market or forex or FX. The currency market is a generic name for all these terms. These are all synonymous terms and most of the time referred to only forex market.
For those who are entering into the world’s huge currency trading market, guidance is important. Even if you are going to trade currencies, exclusively or use the currencies market to further diversify the current portfolio of yours, you can get guidance from the Investopedia Academy for Forex trading for new entrants. The course will clear all your ambiguities regarding forex market trading.