Foreign Currency Exchange
a The foreign currency exchange market (Forex) is a global market, where
traders can exchange their currencies, at any time, online. It includes
all aspects of buying, selling and exchanging currencies, at current or
fixed prices, and focuses on assisting international trade and
investments, by enabling currency conversion. These kind of transactions
include everything; from the conversion of currencies by a traveler
from a converter kiosk in an airport to billion-dollar payments, which
are made by corporate giants around the world. For example, it permits a
company, which is based in the United States to import goods from
European Union member states, especailly Eurozone members, and pay in
Euro currency, even though its income is in the United State dollars.
The
mechanics of a trade are typically identical to those in other markets
or stock exchange. The only difference is that on Forex, when someone
buys one currency, has to sell another at the same time. That's why the
currencies are always quoted in pairs, like the EUR/USD (Euro and US
Dollar). If a trader believes that the Euro will increase in value
against the US Dollar, he buys Euros with US Dollars. If this exchange
rate rises, he sells the Euros back and cashes out his profit.
Moreover,
foreign currency exchange rates fuctuate, based on several economic
factors, such as inflation, geopolitical events or industrial
production. These factors can influence a great deal the traders and
it's important to take all these factors in consideration before
deciding if they have to buy or sell a currency pair. Even though the
foreign currency exhcange can be profitable for the traders, it also
carries a lot of risk and may not be suitable for everyone. So, it's
very important that before anyone decides to trade foreign exchange, has
to carefully consider his investment objectives, as well as his level
of experience in the trading market and of course all the risks
involved. Moreover he should sustain a loss of some or maybe all of his
initial investments, which means that it's better not to invest money
that he can't afford to lose. In case of doubt, it's better to ask for
the help of a special advisor on these matters.
As technologies
have improved the latest years, the foreign currency exchange market has
become more accessible, resulting in an unprecedented growth in online
currency trading. In fact, it has become an international online market
for traders all over the world, with around 3.2 trillion dollars in
daily volume and operates 24 hours market action.