Overview of Foreign Exchange Market
"FOREX" or "FX Market" are the terms commonly used to describe a Foreign Exchange Market. This is largest and the busiest markets amongst the business houses of the world. The average daily turnover of FOREX has reached over a US $ 1 trillion till date. Such a huge amount cannot be matched even by the entire group of U.S. equity markets.
Foreign Exchange involves the continuous buying and selling of different currencies. Normally a pair of currency is required to carry out foreign exchange processes. The combination can be Euro to Dollars (EUR/USD) or Dollar to Rupee (USD/RS) in case of Indian currency.
Why do we really require a foreign exchange market? There are two reasons that can be possible. A number of business transactions take place between different countries of the world that have their respective domestic currencies. Due to this import and export between companies
or governments of various countries some amount of foreign exchange takes place to convert the profits made in foreign currency to their domestic currency. Apart from this, others are involved in this foreign exchange market for trading in order to derive profits caused due to the ups and downs in currency value everyday.
FOREX Market is divided into two groups - Majors and the Minors. Most of the traders are involved in trading with the major players of the market which are the Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. Trading with these currencies ensures better business opportunities for traders since they are the most traded currencies.
Sydney is the starting point for the foreign exchange market and as it travels to different business centers across the globe it finally ends its 24 hour journey in New York. This market runs 24X7 and transactions can be carried out at any hour of the day via telephone or any other flexible electronic communication network.
A deep study of the market is essential for a foreign exchange trader to be able to cope with the rapidly changing scenario of the FOREX market. The prices of currencies round the world keep altering due to various political and socio-economical factors. Governments at times have a large share in influencing the
FOREX market to either raise their currency value by buying their domestic currencies or lowering the currency value by flooding the market with its domestic currency. There are a few major players who can affect the course of the FOREX market bringing about a major shift in currency value. However, the FOREX market is too large to be affected by the policies of a single most organization, however strong it might be.
FOREX experts deploy a lot of technical help to assist them in handling major changes in the foreign exchange charts. All the procedures involving FOREX transactions make use of various charts, patterns and mathematical calculations. Many experts have ways of predicting the possible changes that can occur depending upon the present day political or economic status of countries around the globe. Unexpected events can cause unpredictable rise or fall in the FOREX market depending upon the time that it takes to recover from that event.