The over-the-counter or a globally decentralized market is known as Foreign Exchange market. Actually this is the trading of one currency to other which involves buying selling and exchange of currencies at determined price. This motivates the international trade as well as investment through currency conversion. For example India wants to import goods from United States and pay USD (united state dollar) even though its income is in Indian rupees. It strengthens speculation and evaluation to the value of currency. During basic foreign exchange transition, one has to buy or sell some amount of one currency by paying or by exchanging with some amount of other currency.
Between 1970s, the forex began, which had their own protocol in order to make a relation between world’s major industrial country in the terms of commerce and finance after World War II.
Who trades forex and why
Generally central banks, banks, corporation, retail traders etc are the main participants of this market. It work as a financial institutions, for example, banks divides themselves into several small financial firm and act as a “dealer”, which is why this market I known as “Interbank Market (Plaza)”.There are basically three type of currency pair, they are EUR/USD , GBP/USD and USD/CHF (dollar Swiss) etc, which comes under major currency pair because their base is US dollar. Secondly EUR/CHF) (euro Swiss), EUR/JPY (euro yen), GBP/CAD (pound Canadian dollar) etc which is called as cross currency pair, they are non USD which means the base is not a dollar. Lastly the third one is exotic currency pair which basically refers to developing country verse developed country for example, USD/ZAR (dollar African dollar), USD/MXN (Dollar Maxican peso).
The uniqueness of forex
Undoubtedly the characteristics of Foreign exchange market make it unique as always .Since it is having a great trading volume and largest asset leads to high liquidity. Almost whole world can do market because of low barrier to entry which represent a kind of global dispersion. There is no limitation to trade, trade anytime you want as there is no hiatus in operation, per day 24 hr except weekend. There are varieties of factor which can increase or decrees the exchange rate. As there is low transition cost so people can use grip profit and loss margined with respect to the size of their account.
Since 90% of retail traders loss their money, only 10% are able to earn success in this trade .With a proper risk management and strategy with confidence play a vital role. This market is full of opportunist so all the moment need to be careful and conscious. Instead of impulsive decision informed decision make a good deal. Central bank, Banks, corporations alone with retail traders are the players in this market. Due to low barrier to entry it make this tread a popular trade to gain money but it is not a rich quick scheme, it need proper concentration and hard work along with analysis of every instant.