Foreign exchange or forex is a trading market where the process of converting the currency of one counter with the currency of another country takes place. The main reasons for converting one currency to another are tourism, commerce and trading. The volume of average daily transactions exceeds a whopping sum of $5 trillion. It is a global market for trading in foreign currency. The investors or the traders exchange national currencies of different against each other in a pair of two. It is the largest trading market across the globe because of worldwide reach. This also makes the forex market a high liquidity market. The forex market can be used for both spot trade as well as derivatives. However, Forex analysis is very important if you wish to become a Forex millionaire.
What is the foreign exchange market?
A foreign exchange market or a forex market is a place where all the currencies of the world are traded against each other. Currencies are part of human’s life; they are needed because it is used to carry out business. If you are entering into any type of transaction from another country you have to pay them in their currency. This can be done only through foreign exchange. Forex market gives you the platform to carry out your trade.
There is no central location of the forex market. Forex market operates around the world through global networks. The currency trading is done electronically through over-the-counter i.e.; OTC market. This means that all the trading transactions are done via computer. The market is open 24 hours of the day across the world because of variations in time zone. It is the most active trading market in the world.
Risks of forex trading
As much as the forex market is a profitable market it is an equally risky market. The complexity in the market arises because of varying rules and regulations. There is no standardised forex instrument thus, increasing the risk factor. The pricing mechanism of the market depends on the demand and supply theory. The participating banks make bids for the currency they are interested in trading. So to make it a bit easier you can trade through Siby Varghese to get the best service
One such risk that can affect the investors pocket is the volatility of the market. As much as the volatility of the market makes it highly profitable market it also increases the risk of loss. The price of the currency keeps fluctuating which increases the risk factor.