The foreign exchange market or the Forex market can be defined as a globalized and a decentralized market that is used for trading all currencies. This also includes various aspects like buying, exchanging and selling of currencies at the determined prices as well as the current prices. If the volume of trading is taken into consideration, it surely is the largest market in the world. The main and important participants that are included in this market are the large international banks and these have a major say as far as Forex is concerned.
Unique characteristics of Forex market
Basically this market is extremely unique because of the following characteristics.
• It has a very huge and complex trading volume that represents the larger asset class in the world and this can very easily lead to higher amounts of liquidity.
• It also has a great geographical depression.
• It operates on a continuous basis for 24 hours a day. It does not operate on weekends except in Sydney and New York.
• There are a variety of factors that can very easily affect all these exchange rates.
• There are also very low margins of relative profit that can be compared with other markets of fixed income.
• There is also a use of leverage in order to enhance this profit as well as loss margin and this is done by giving due respect to the size of the account.
What changes the Forex rates?
There are a variety of factors that can determine the change of rates as far as Forex is concerned. This is because all of these currencies trade on an open market and this includes bonds, stocks, cars, computers and other services. The value of a currency fluctuates as its demand and supply also fluctuates. Just like all the other things, an increase in the supply or at any time the decrease in demand for a currency can easily cause the value of that particular currency to fall. Also a decrease in supply and an increase in the demand for a particular currency can cause its value to rise significantly. It must also be understood that all these trades are executed by using the borrowed money. This can thus allow you to take a lot of advantage of this leverage. Hence taking advantage of even the smallest of all the leverages that are presented to you. It is one of the important things to remember.