Global Forex Brokers
Here you will find information on a list of the best Global Forex Brokers, Free Forex Trading Systems, Forex Brokers Reviews, Forex Trading Platforms, Forex Products, Forex Markets and Forex Banks. The Foreign Exchange (FX) Market (Forex Trading, FX, or Currency Market) is an internationally decentralized market for the trading of different currencies. The Global Forex Market determines the relative values of different currencies around the Globe.
The Forex Market
The Forex Market works through international financial institutions such as Banks, and it operates on several levels. In the background, the Banks turn to a smaller of financial firms known as Dealers, who are actively involved in large quantities of Foreign Exchange Trading. Most Forex Dealers are Banks, so this background market is also known as the Inter-Bank Market. The trades between Forex Dealers can be very large, involving millions and millions of dollars.
Advantages of Forex Trading
The Forex Market helps in the International Trade and Investment by enabling Cross Currency conversions. For example, it permits a business in the United Kingdom to import goods from the European Union member states, especially Euro-zone members, and pay euros, even though its income is in British Pounds. Plus, it supports the direct speculation in the value of different currencies, and helps in trades involving speculation based on the interest rate differential between Cross Currencies.
Forex Trade History
In Forex Transactions, a party purchases some quantity of one currency by paying some quantity of another currency. The modern Forex Market began forming during the 1970’s, after three decades of Government restrictions on Forex Transactions, (the Bretton Woods System of Monetary Management established the rules for Commercial and Financial relations among the world’s major countries and currencies), when countries gradually switched to Floating Exchange Rates, which remained fixed as per the Bretton Woods System.
The Forex Market is special due to the following characteristics:
- It’s trading representing the largest asset class in the world,
- It’s geo-location dispersion,
- It’s operates 24 hours internationally,
- A lot of factors affect the exchange rates,
- The profit margins are low compared to the products,
- Leverage can be used to enhance profit and loss margins.
Due to such characteristics, the FX Market is sometimes referred to as the market with perfect competition.
Spot Trade contracts are 2 day delivery transactions (except for US Dollar, Canadian Dollar, Turkish Lira, Euro and Russian Ruble, which is 1 day transactions), as opposed to the futures contracts, where the contracts are normally 3 months. This type of trade represents a direct exchange between 2 currencies, and has the shortest time to expire, real cash is traded rather than a contract; and interest is not included in the transaction.
Forward Trade Contracts are a good way to Hedge Forex Volatility Risk. One way to deal with the Forex Risk is to engage in a Forward Transaction Contract. In this Transaction Contract, money does not really change hands until future expiration date. A buyer and seller agree on an exchange rate for any date in the future, and the transaction occurs on that date in the future, regardless of what the market rates are in the future. The Trade Contract can be for few days, months or years. Then the Forward Contract is negotiated and agreed upon by both parties, the contract becomes locked.
The most famous type of Forward Transaction is the Forex Swap Contract. In a Swap Contract, 2 parties exchange currencies for a certain length of time in the future and agree to reverse the transaction at a future date. These are not standardized contracts and are not traded through an exchange, but rather private transactions. A deposit is normally required to hold the position open until the transaction is completed at a future expiration date.
Futures Trade Contracts are standardized Forward Contracts and are normally traded on the Foreign Exchange Market. This type of contracts have an average length of 3 months. Futures Contracts are normally include any interest amounts. Futures Trade Contracts specify a standard volume of a particular currency to be exchanged on a specific settlement date in the future agreed at present time.
The Foreign Exchange Options (Forex Options or FX Options) are derivative products, where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed Exchange Rate on a specified date in the future. The FX Options Market is the largest and most liquid market of any kind in the World.
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