One of the most fascinating markets in the world right now is the Foreign Exchange Market. What individuals popularly call fx trading, currency trading or Forex exchange occurs on this market.
In the simplest explanation, the foreign exchange market is the place where currencies are traded. Presently it is the largest and most liquid market in the world. On an average daily trading volume of almost five trillion dollars. Even if all the equity markets in the world combined, all those markets would still be overshadowed by the immenseness of the Forex market.
Fx, foreign exchange or currency exchange is usually tagged as Forex. Large financial institutions, corporations, companies, banks, and rich investors are experts in Forex trading. They have discovered greater trading potentials that other investments can’t cater to.
Currencies are very important. These are medium for exchange and without it, people cannot do trades and businesses. If an individual who lives in America wants to buy a product in Europe, that person has to pay in euros to conduct a trade. That person has to pay in Euros to buy that particular product. A tourist traveling in India cannot pay in a dollar to see the Taj Mahal since the dollar is not the accepted currency in India. Hence, the tourist should first exchange the dollar to the Indian Rupees before seeing that fantastic monument.
Currency exchange is essential for businesses and various trades to occur. This is the main reason why the currency exchange market or Forex market is the biggest market in the globe.
The foreign exchange market has countless features that attract investors and traders alike. One notable characteristic of this immense market is that it’s a decentralized market. Trading transactions don’t happen on one centralized exchange. In the Forex market, fx trading is carried out electronically or over-the-counter which means transactions happen electronically.
Another notable characteristic of the Forex market is that currencies are traded all around the globe and across almost every time zone. Currencies are traded in huge volumes in cities like London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris, and Sydney – the cities with the major financial institutions and corporates of the world. When the U.S. market closes, the market in Tokyo and Hong Kong is just about to open. This means the Forex market is open round the clock say 24 hours a day.
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There are many ways to trade in Forex such as the spot, forwards, and the futures market. The most widely-used way to trade in Forex is through the spot market. This is the largest market in the forex world for the reason that the forwards and futures markets bases their underlying assets in the spot market.
Earlier, the futures market was the most popular/preferred market in forex trading. But due to the recent technological advancements, it gave birth to electronic trading and numerous Forex brokers. Since then, the spot market experienced great growth in activities and has now surpassed the forwards and futures market as the preferred trading grounds for investors and traders.
Due to its popularity and attractiveness to investors and traders, many people brought many names to Forex such as fx, fx trading, currency exchange, and foreign currency exchange but they are simply referring to the Forex Market