What is forex:
Forex is an inter-bank market that took shape in 1971 when global trade shifted from fixed exchange rates to floating ones. This is a set of transactions among forex market agents involving exchange of specified sums of money in a currency unit of any given nation for currency of another nation at an agreed rate as of any specified date. During exchange, the exchange rate of one currency to another currency is determined simply: by supply and demand – exchange to which both parties agree.
Advantages:
Liquidity:
the market operates the enormous money supply and gives absolute freedom in opening or closing a position in the current market quotation. High liquidity is a powerful magnet for any investor, because it gives him or her the freedom to open or to close a position of any size whatever.
FOREX is a highly profitable business which does not depend on time, place or political situation in your country. Advantage of this business is that you make deals using computer from any part of the world 24 hours per day 5 days per week.
What Moves Forex :
Foreign Exchange is affected by various economic and political factors. The largest fluctuations in currency prices usually occur during Central Bank intervention, when governments trade in huge amounts forex in an attempt to either raise or lower the value of their own currency. This, aswell as many other factors such as interest rate changes, economic figures, political instability and large lot transactions by hedge funds can move the market.
Participants:
Commercial Banks
Central Banks
Currency Exchanges
Investment Funds
Brokerage Houses
Participants of this market are, first of all, large commercial banks through which the basic operations under the instruction of exporters and importers, investment institutes are carried out, insurance and pension funds, hedge and individual investors. Also these banks operations and in the interests due to own means, thus at large banks volumes of daily operations reach billions dollars, and at some banks even the basic part of the profit is formed only due to speculative operations with currency.
Glossary:
Appreciation - A currency is said to ‘appreciate ‘ when it's price increases against a specific currency or group of currencies in response to market demand.
Arbitrage - The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.
taken from fxmalay.com
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