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About Foreign Exchange (Forex)

3:52 AM | Labels: |

FOREX is an abbreviation for Foreign Exchange.

FOREX provides international trading between various currencies without any centralization. There are financial centers established around the world where trading goes around the clock between different buyers and the sellers.

The trading operation work from 20:15, GMT on Sunday until 22:00 GMT, from Friday.  Along with these centers, FBS and Reuters dealing 3000 are two interbank FX trading platform. Learning FOREX results in high monetary income and better knowledge of the current market.

FOREX determines the power of one currency value over another. It plays a pivot role in enabling currency conversion, which enhances international trade and investment. Countries are paid as per their own currency values, even if they are trading with a different country. For example, it allows business in Australia to import goods from America, and they pay U.S dollars (USD) in spite of its income in Australian dollars (AUD) or Swiss Franc (CHF).

Many participants in this market make it interesting for learning FOREX. There are multinational companies which have their business setup in different countries. They have to pay wages, taxes and other costs borne in the nation with the countries own currency. For example, if a U.S. giant company establishes its Knowledge Process Outsourcing center in China, they have to bear all expenses in Chinese yuan.

Major participants are speculators who are always there to take benefit from fluctuation rates. There are various factors, which determine rate fluctuation, so at present it can be said that the information reach the world at the same time. However, these major participants cannot play any pivot role as trading reaches between 1 and 1.5 trillion U.S dollars a day. With such a high amount involved no one can impact FOREX conversion.

How does forex work?

As mentioned above, transactions in foreign currencies are not centralized in any manner. NYSE, SENSEX and many other markets are completely centralized. Performance of a single giant company can enhance full market trade. So, that's why you should learn FOREX to get an added advantage.

There are outstanding dealers who will quote all major currencies around any time zone in the world. These dealers are available both in financial centers and online. Small term investors with capital less than US $ 500 do speculate on currency prices by getting a credit line.

This process drastically increases their potential gains and losses. Relative values of various currencies are matched to get the best value of currency. Pips refer to the term which changes in currency value.

For example, the value of 1 dollar is 0.63420 pounds. Pips is the smallest term in FOREX market. The market changes every time at every zone. So if the value changes to 0.63430 the price is increased to 10 pips. You will earn money when the pips unit comes into your way. Otherwise you need to revise your strategy for getting proper profits.