Foreign exchange is nothing but the exchange of the money between the governments of different countries. It is abbreviated as Forex.
To get one type of currency for the other, the trading of the foreign exchange is useful. Compared to the other business or the markets, this Forex market is a decentralized market and does not have any physical location. It is operated by global network banks, corporations, and also by the individuals for trading the currencies.
Because of the operations being done 24 hours with enormous amounts of money being traded it is the world’s largest financial market.
As it is the world’s largest financial market, the volume of the market per day is about $4 trillions.
Without any exchanges being kept open the investors can respond to the fluctuations of the currencies which are caused by the political, social and the economic events at the time they occur.
With the exceptions on the weekends, the trading has been done between the different buyers and the sellers where the financial centers play a key role. The Forex market also determines the values of different country,s currencies.
The main goal of the market is to allow the businesses by changing the currencies for trade and the investments. For example for importing the European goods to US, they have to pay Euros.
The Forex market is the world’s largest and the famous one because of the following
- Dispersion of the market geographically.
- High liquidity because of the high trading volume.
- Because of the operations being done continuously, except the week ends.
- Exchange rates are being affected by the various factors.
- When compared to the other markets, the relative profit margins are low.
- With respect to the account size, the profit margins are being enhanced.
The above factors make the Foreign exchange market unique. And the foreign exchange also refers to the exchange rates, foreign exchange reserves, retail Forex platform, services of the foreign exchange services etc.
