FOREX MARKET: THE SCOPE OF THE MARKET
Forex also termed as FX is the biggest market in the world covering over a hundred countries and possessing well over $6 trillion as revenue. The market experienced a very large increase in the total amount of revenue in quite a short period. It accumulated over $2 trillion in less than a decade which is quite impressive. This market is focused on the exchange of currency to another.
Every forex trading conducted is done over the counter implying that there is no physical exchange as seen in stocks.
The most popular currencies are the ones involved in pairs for trade on the market. The most popular currency is the United States Dollars which is the official currency of the United States of America. The code for the currency is USD and it is frequently used in tons of forex trades. Second to this currency is the euro. The euro is accepted in almost 20 countries with the code EUR.The others include the Japanese yen with the code JYP; the British pound with the code GBP; the Australian dollar with the code AUD; the Canadian dollar with the code CAD; the Swiss franc with the code CHF; and the New Zealand dollar with the code NZD, in respective order.
These codes are quite similar to the symbol of a stocks ticker. They are usually three letters used to identify the currency. All the over 170 currencies in the world are assigned this code.
Quotation of trades
Currencies are traded in pair and each pair is a representation of the exchange rate of the two currencies. EUR/USD is an example of the pair. The currency on the left is the base currency while the currency on the right is the quote currency. The exchange rate is a representation of the amount of quote currency needed to purchase one unit of the base currency.
Therefore, the base currency is always represented as one unit while the quote currency changes depending on the current market and the amount needed to buy one unit of the base currency.
At the point when the exchange rate increases, the base currency must have risen in worth relative to the quote currency and conversely, when the exchange rate falls, the base currency must have fallen in value.
Not all individuals make use of forex market for the exchange of one currency to another. Most just buy currencies and hold on to them for a future forex resale for the hope of higher rate at the point of sale. This is quite similar to an investment but the market has to be watched closely in order to determine the direction the market will flow so as not to be left holding a devalued currency. Once there is hotforex, the deal can then be closed for a profit.
The market is regularly used by governments of different countries as well as their central banks indicating the dominance the market has on the world’s geopolitical and economic sector.