INTRODUCTION TO THE FOREX MARKET INDUSTRY
Posted on Sun, Aug 2 , 2020
The foreign exchange market is where currencies are traded. You may not know it, but forex is actually one of the enormous market in the world, with over $6.6 trillion in average daily volume transacted.
The forex market is the largest liquid market in terms of daily trading volume in the world. High liquidity means a trader can trade with any type of currency. Timing is not a constraint as well; trading can be done as per your convenience. The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney—across almost every time zone.
So, if forex is so big, why so few people use it?
The simple answer is that you have been probably used the forex market before, either directly or indirectly. Any time you take a trip to another country and exchange money, you just made a forex trade.
People trade currencies all the time, and that currency becomes an investment. Whenever you buy something in a different country, you are just doing a forex trading. You paid in your own currency and the manufacturer was paid in a different currency.
Here's a simple example. Imagine you took a trip to United States in 2010 and purchased the US Dollars for a price of $65. Since you bought the dollars in 2010 and sold them in 2015 for $70, you made a $5 profit because you held on those dollars and had sold at the right time.
The $6.6 trillion forex market usually runs on the same idea. Many of the world's leading banks, private institutions, and insurance companies actively trade currencies as a way to make money and since they invest in a very huge amount so they enact profits and losses in the millions every day in forex trading.
Many have not heard of the forex market because the market has historically been largely exclusive to industry professionals. If you think a currency will go up, buy it; If you think it will fall, sell it. A forecast that one currency is weaken will simultaneously strengthen the other currency because currencies are traded as pairs. The average person could buy a stock but couldn't trade currencies. But now, the Internet brings up the forex trading within reach of the average person sitting at home.
Forex experts will guide why you should trade forex and help in taking concrete investment decisions and can profit them by buying the currency with the higher interest rate and shorting the currency with the lower interest rate.