The Forex market is a global decentralized financial market for the currencies exchange. It is geographically dispersed and as a result attracts traders from all over the world. In addition to that it allows for trading 24 hours a day except on weekends providing huge volume and liquidity. Being the largest asset class its estimated daily trade is over £3.2 trillion.
The main players of FOREX market are Commercial Banks, Governments and other financial institutions. Dealers and individuals are also playing a big role in this market.
The foreign exchange transaction is the process of buying currency of one country with the currency of another country. Currency traders buy and sell currencies in the hope of profiting when one or the other going either up or down. Most of the Forex transactions are speculative which means companies or individuals are not planning to actually deliver the currency at the end. Instead they are solely speculating on the movement of that particular currency.
All transactions are conducted Over – The – Counter (OTC) which means the transactions are made via computer networks among traders around the world.
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Types of FOREX transactions
Spot transaction – also known as FX spot, is an agreement between two parties to buy and sell currencies at an agreed price for settlement on the spot date.
Forward transaction – a special type of transaction where both parties agree to exchange currencies at a future date and at designated price.
Limit Order Contracts – the contracts that allow you to set the proffered rate of currencies exchange. The computer Global Currency exchange network will then try to match the offer.
Currency Swaps – is an agreement between two parties to exchange principal and fixed rate interest payments on a loan in one currency for principal and fixed rate interest payments on an equal in another currency.
Major Currency Pairs
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