Forex Training Courses in Foreign Exchange Currency Trades and Businesses
Knowing More about Forex Trading
The foreign exchange market, or more commonly referred to as the forex, is basically a particular market wherein various kinds of currencies are traded. Although most of us don’t really realize the importance of currencies in today’s society, they really are of great importance to the majority of people all over the world. This is because of the fact that the exchange of currencies is vital for the conduct of foreign businesses and trades.
For instance, if you are living in a certain country and you want to buy a particular product from another country, then you or the company wherein you will buy the product from has to provide payment which is in the form of the currency of the product’s country of origin. If you are in the United States and you happen to want to buy a product from France, then this would imply that the U.S. importer has to trade or exchange U.S. dollars into the equal value of euro, which is the currency of France.
Aside from being very important in foreign trades and businesses, currencies also play a very important role in travelling. If you are an American tourist and you want to see Japan’s famous Mt. Fuji, you cannot pay using U.S. dollars but instead, you have to pay the currency which is accepted there locally which is the Japanese yen. Thus, in order to enjoy the privilege of travelling around Japan as a tourist, you have to exchange your U.S. dollars for Japanese yen at the most current exchange rate.
Attributes of the Forex Market
The foreign exchange market is considered to be the biggest and most liquid financial market present all over the world. Society’s need to exchange or trade currencies for business, travel or any other purpose is the main reason why the forex market dominated as the largest market in the financial world.
Another attribute of the foreign exchange market is having no central marketplace wherein the foreign exchanges will occur. Instead of having a central marketplace, the trade of currencies is done electronically over the counter. When we say electronically over the counter, it implies that in contrast to having a centralized trade or exchange, all exchanges or transactions are done between various traders from all over the world with the use of computer networks.
Trade of currencies are conducted globally in the main financial centers of New York, Singapore, Zurich, London, Hong Kong, Tokyo, Paris, Sydney and Frankfurt. Across almost all time zones, the forex market is open for 24 hours a day and for 5 days a week. With this, this particular market can be very active at any hour of the day with constant changes in price quotes.
The Spot, Forwards and Futures Markets
Traders, which consist of individuals and institutions and corporations alike, do transactions in the forex market in three major ways namely the spot, forwards and futures market. Among these three ways, the spot market proves to be the largest market for forex trading since it is the real and most fundamental asset upon which the futures and forwards market are based.
The futures market used to be the most popular among traders due to its availability to individual investors for a much longer period. But then, when electronic trading dawned, the spot market experienced an enormous flow of activity and has eventually outdone the popularity of the futures market. Individual investors, speculators and traders have then preferred the spot market for forex trading.
The spot market is usually the one referred to when individuals refer to the foreign exchange market. The forwards and futures market on the other hand are known to be more popular among companies which have the need to hedge the risks of forex trading to a future certain date.
The Spot Market
Basically, the spot market is a particular market wherein different currencies are bought and sold in accordance to their current price. This particular price is established on supply and demand. Aside from this, it is also determined on a lot of other things such as economic performance, local and international political state of affairs, and also the current interest rates. A currency’s probable future performance against another currency is also among the determining factors. A finalized deal is referred to as a spot deal.
The spot market is a specific type of market dealing with exchanges and transactions in the present time instead of in the future. However, it is important to note that these exchanges take two days for their settlement.
The Forwards and Futures Markets
In contrast to the spot market, the forwards and futures markets don’t do trading of actual currencies. As their name would suggest, the contracts dealt with here correspond to a specific price per unit and currency type and also a future settlement date. Specifically, in the forwards market, parties buy and sell contracts over the counter and then establish the terms and conditions of the agreement among themselves. In the futures market, on the other side, parties buy and sell futures contracts based upon a specific standard size and a particular date for settlement on public commodities markets. These future contracts contain a specific set of details and these details include information such as dates for delivery and settlement, minimum price increments which can’t be customized and also the number of traded units.
Forex trading is considered to be among the most prospectively rewarding forms of investments made available for the public. Probable profits prove to be huge in relation to the initial capital investment. However, even with this great earning potential, it is important to note that forex trading also comes with certain levels of risk just like with any other form of investment. Thus, thorough proper considerations should be done first before venturing into this undertaking so that you will be able to make the most out of the money you invest. Seeking guidance from financial advisors will also prove to be greatly useful for increasing your chances of succeeding in this venture.