Mar 1 2010
FOREX general overview
FOREX (Foreign Exchange Market) is a sum of international currencies sales and purchases operations and loans provided by certain conditions (amount, exchange rate, period) to certain date. The main FOREX participants are: commercial banks, currency exchanges, central banks, international trade companies, investment funds, broker’s companies and private investors.
US dollar - USD, Euro - EUR, Japanese yen - JPY, Swiss franc - CHF and English pound - GPB are the main FOREX currencies that are being traded the most. In April 1998 the daily FOREX cash flow amounted to $1.982 trillion. The London exchange had about 32% of cash flow, US exchange – about 18% and German exchange – 10%. USD operations are 70% of all FOREX operations and electronic brokers have 11% of FOREX cash flow.
The daily operations of biggest banks (Deutsche Bank, Barclays Bank, Union Bank of Switzerland, CityBank, Chase Manhattan Bank and Standard Chartered Bank) amount to $1 billion. The spot operations or conversion operations are purchases and sales that are being executed on the second working day from order placement. In 1998 about 40% of all FOREX activities were the Spot-market operations.
The typical amount of deals for interbank trading equals to $10 million. Though, marginal trade systems makes FOREX available for private investors as the brokers provide them with credit levers 40-100 times more than their actual deposits. The clients only suffer the loss risks and deposits are the brokers’ securing provisions.
FOREX participants
FOREX participants are the big commercial banks that perform their operations by orders of international traders, investment institutions, security and retirement funds and private investors. These banks also perform operations at their own capitals to get profited. Some banks have millions of dollars daily operations and some of them have the main profit from only speculative currencies operations. Also the broker’s houses that act as agents of banks, foundations, dealing centers, etc. are the active FOREX players. Commercial banks and brokers houses not only buy or sell currencies at the provided prices but also set their own prices. This way they influence exchange rates and are called the market makers.
In contrast to active participants the passive participants are not able to set their own prices and just buy or sell currencies at the given prices. The passive participants usually pay for international trade contracts, invest in foreign production, open branches overseas or create joint-stock companies, speculate on the market, hedge currencies risks, etc.
The central banks usually enter FOREX not to profit but to verify or make corrections to their national currencies rates. Sometimes these banks perform interventions masked through the commercial banks not to suffer losses.
If active participants operate millions of dollars than passive participants use margin trade to operate at the market and profit with even small amounts of own money.
The list of FOREX participants indicates it is used by serious business for serious reasons as rapid changes of exchange rates affect the whole business society. So, learning the FOREX operations is a component of successful business.
The selection of a
foreign currency trading service is not an easy task. And one shouldn't dash to make a decision on such a service.
It is very important that you follow a final piece of advice - today the online technologies give you a truly unique chance to choose what you want at the best terms which are available on the market. Funny, but most of the people don't use this chance. In real practice it means that you should use all the tools of today to get any
foreign currency trading information that you need.
Search Google or other search engines. Visit social networks and have a look on the accounts that are relevant to your topic. Go to the niche forums and join the discussion. All this will help you to create a true vision of this market. Thus, giving you a real opportunity to make a smart and nicely balanced decision.
P.S. And also sign up to the RSS feed on this blog, because we will everything possible to keep updating this blog with new publications about the topic of
foreign currency trading for dummies and important trends on the currency exchange market.
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