This market took birth somewhere around the 1970s. Floating of currencies along with free exchange rates started in this period. Just like the share prices, forex market was determined by the law of demand and supply. The US Federal Reserve also was a deciding factor on which the forex rates depended.
The daily trading which takes place in the Forex market is really huge. It is one of the most liquid markets in the financial world with about 1.5 trillion US dollars turnover taking place daily. Due to this enormous volume, it is impossible to manipulate the market. Hence, no individual trader or financial institution is in a position to manipulate the currency price.
The Forex market is such a fast market that it is not possible to influence the market. The forex market offers high liquidity due to the enormous exchange which takes place. Opening and closing of positions takes place within seconds. There are buyers willing to buy what the seller wishes to sell. Due to the time zone differences, this market operates 24 hours daily, 7 days a week. It is open through day and night.
In comparison to the share and stock market, there are no long term investments. In forex trade, even minute changes are very important since they make a huge difference. It is also true that there are hedge investors who invest for a long term.
HOW FOREX WORKS
The NYSE operates in New York and the ASX operates in Australia. There is no centralized location for the Forex market. It operates globally and works round the clock all 24 hours a day. The major Forex centres are Paris, New York, Sydney, Frankfurt, Singapore, Zurich, Tokyo and London.
MARGINAL TRADING
This form of trading is very similar to using the credit card. You borrow money to do trading in currency. This helps small investors in going ahead and taking risks. You are able to trade more with less money. The brokering company provides the capital for trading.
Marginal trading is done in lots. The normal lot is 100,000 of a unit currency. You need to hold at least 1000$ and the remaining 99,000$ is covered by the brokerage firm.
When the price of the currency increases, you can sell the position and in the bargain, the money earned on the difference is your profit.
Various investment strategies.
It is important that you do your homework and also are educated on the currency market, before beginning trading. It is imperative to adopt an analytical approach. This is what is advised by most experts in the Forex business. The experts adopt a fundamental and technical analysis approach.
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