Forex or the foreign exchange market is used by people for buying and selling of currencies. The forex market is also known as the currency market.
Forex Market in Detail
Just like you visit a vegetable market to buy vegetables or a fish market to buy fish, you can buy or sell currencies like US dollars, British pounds or Australian Dollars in the forex market. However, unlike other markets, the forex market is not located in one central location. The market is open across the world for 24 hours a day, five days a week.
Who are the participants in the forex market?
Among all the financial markets, the forex market is the largest with average daily trading of more than $4 trillion. Its major participants are listed below.
- Central banks such as US Fed, Bank of England, Bank of Japan
- Commercial banks
- Companies
- Hedge funds
- Individuals
Different participants deal in for exchange for different reasons.
- Central banks buy and sell foreign currencies for various reasons such as the stability of their own currency.
- Commercial and investment banks participate in the forex market either for themselves or on behalf of their customers.
- Exporters need to buy their domestic currency in exchange of foreign currency that they receive from other countries.
- Corporations use the forex market for hedging themselves against any future currency fluctuations.
- Individuals participate in the forex market for speculation or making gains through fluctuations in currency prices.
Rise of the forex market
Forex market has grown substantially from transactions of around $1 billion a day during 1980's to nearly $4 trillion today. One of the major reasons for its growth is the improvement in technology such as computers and internet, which make it easy to conduct international transactions from any location. Globalization is another reason for the increase in forex transactions as more and more companies are getting international, and so they require other currencies to pay their international suppliers or staff.
If you are an individual who trades in the forex markets, you should check our Forex margin calculator.
Forex: Supporting guides and articles
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- Forex Exchange Rate: Exchange rate is the price of one currency in another currency. Exchange rate is also known as the rate of exchange
- Forex Currency Pair: When you deal in the forex market, you deal in currency pairs. You cannot buy an individual currency. Instead you buy units of currency pairs.
- Forex Leverage: Forex leverage refers to investing in the forex market on a credit basis or by using debt.
- Forex Market: Forex or the foreign exchange market is used by people for buying and selling of currencies. The forex market is also known as the currency market.
- Forex Trading: Forex trading refers to the buying and selling of currencies to take advantage of the price movements and volatility of the forex market.
- Forex Margin Call: Margin call is a call from your forex broker when your account balance goes below the maintenance margin.
- Forex Margin Ratio: Forex Trading: Margin ratio is used for expressing the forex leverage in a ratio format.
- Forex Margin Used: Margin used indicates the amount you have actually used in a Forex trade, excluding any leverage.
- Forex Maintenance Margin: Maintenance margin refers to the minimum amount you need to maintain in your forex trading account.
- Forex: Price Interest Points (PIPs): PIPs or Price Interest Points are commonly used by forex traders to indicate profits or losses.