Forex trading and the foreign exchange market

Forex trading and the foreign exchange market unlike most other agencies or organizations is actually decentralized, and used for the trading of currencies worldwide. In fact, it is the largest market in the world. If you have just heard of the forex or foreign exchange market, you might feel a bit out of the loop. So what is it? What is it for? What does it do? As you know, every country uses a different type of currency, and there is no way around that.

Forex tradingAs of 2015, we have not managed to establish a global currency, but don’t tell the dreamers from the 1950s about it“ they might be a bit disappointed. Some of the most popular currencies in the world include the US Dollar, the Euro, Swiss Frank, Japanese Yen, Chinese Yen, and, of course, the Pound Sterling. There are other popular currencies, but these are at the top.

Forex trading and who trades the market?

Obviously, the larger international banks are the largest players in the market, but there are also large corporations that work with this market as well. Additionally, there are day traders who work at home, or on Wall Street who buy and sell currency by the hour in an attempt to make a profit.

Though the price of the currency is set by the exchange market, transactions are handled by dealers, which are normally banks themselves. This interbank market deals with foreign trades that number in the millions of dollars (or euros, etc.). It may be of interest to note that the forex trading has very little supervision due to sovereignty issues.

How does the forex benefit business?

As we mentioned before, each country or nation has its own currency, which makes it difficult for individuals or corporations to purchase products or services overseas. For example, one would find it problematic to accept Japanese Yen as a payment if their income happened to be US dollars. That being the case, it is very beneficial to use the foreign exchange to purchase the correct currency first, and then make the second purchase from the company in question.

The foreign exchange market continues to display profitability for both the individual and the large corporation. The forex trading simply could not exist without it, and so long as there are foreign currency and a free market, there will be the need for a foreign exchange to handle the different types of currency. 

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