The Forex market and its importance in your everyday life

Posted by jenni on June 1st, 2017

Forex i.e. Foreign Exchange is the biggest financial market in the world. It is a source of income to many traders and banks of the world. It is not tied to any stock exchanges in the world. In fact, it is over-the-counter (OTC) market. It helps international trade and investment.

Features of Foreign Exchange Market

As far as we have understood the concept of Foreign Exchange Market, we can point out some features of the foreign exchange market as under:

1. Medium of profit to an individual or an institution
2. The market does not rely on any one particular economy
3. High trading volumes
4. Most liquid market in the world
5. Long trading hours of 24 hours a day except on weekends
6. Different exchange rates for different currencies
7. It rarely involves the exchange of bank notes

Operation of Foreign Exchange Market

There are a thousands of securities traded on a stock market. But in the foreign exchange market, there are only eight currencies in which trade takes place. These are:

• S. Dollar ($)
• European Currency Unit (€)
• Japanese Yen (¥)
• British Pound Sterling (£)
• Swiss franc (Sf)
• Canadian Dollar (Can$)
• Australian Dollar
• New Zealand Dollar

 Market Participants

The player of the foreign exchange market can be an individual or an institution. These mainly constitute of the following:

Banks: The industrial banks are the coronary heart of the forex marketplace. Whatever international transactions take region in the marketplace, take area without delay or indirectly through industrial banks. Whether be it exports, swaps, options or futures buying and selling, the fundamental a part of the transactions involve the debit and credit of money owed at the banks.

Firms and commercial companies: Firms, companies and institutions are especially worried within the exchange of goods and offerings all through the world. Be it raw cloth, intermediate items, or completed merchandise, it’s going to always involve a pair of currencies involved this is to be exchanged among two parties which, in turn, will involve a trade price and an exchange mechanism. Foreign trade mechanism, right here, will consist of swaps, future contracts, futures, payments through SWIFT, and many others.

Central banks: The crucial banks of the distinct nations play an essential role inside the foreign exchange market. One in their features is to control the cash supply within the usa by means of taking various measures relying upon various factors like – unemployment charge, boom charge of the financial system, inflation rate, government guidelines and so forth. One of such measures can be buying and selling foreign currencies within the foreign exchange market. They can use their forex reserves to stabilize their markets.

Investment management firms: The investment management firms manage large accounts on behalf of their customers and use foreign exchange market to invest into the foreign securities. They have to trade into currencies to pay for international investments.

Retail foreign exchange brokers: Retail traders (individuals) are a small fraction of the foreign exchange market and can only participate through brokers or banks. The retail brokers are controlled and regulated by CFTC (Commodity Futures Trading Commission) and NFA (National Futures Association).

Non-bank Foreign Exchange Companies: These companies offer currency exchange and international payments to private individuals and companies. These are also known as foreign exchange brokers.

Non-baking Financial Institutions: Foreign exchange transactions are also done by non-banking financial institutions. Large pension funds and institutional investors are a part of the foreign exchange market.

Money Transfer/Remittance Companies: These companies help in remitting the money earned abroad by an individual to one’s home country by converting it in one’s home currency.

Hedge funds as Speculators: As in the case of stock markets, speculation takes place, in case of foreign exchange markets, hedging takes place. There is no delivery of foreign currency, nor there is any intention of the purchaser to take delivery of the currency. The transaction takes place only on the movement of the particular currency. This is the benefit taken out of the exchange rate movement in the foreign exchange market.With Axis Buy forex online send money in 100+ currencies at any bank account in the world. Buy forex card for hassle-free & cashless travel. 24X7 availability!

Source : http://shinemarkets.com/blog/forex-market-importance-everyday-life-affects-online-forex-trader/