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What is the currency exchange market? It’s not complex. It’s just exchanging one currency with another. But when it comes to the currency exchange business, the concept attains some extra angles. It’s about exchanging one country’s money with another’s in a way that, after the whole purchasing and selling procedure is complete, the exchanger has some extra money in his hand.
Today, we will cover the largest and the most popular market on earth, Forex is a platform that allows currency trading to all the people around the world.
The Concept of Currency Exchange
To extract profit from currency exchange market, all a person has to make sure that the currency he is buying will have a price-hike in the future. So, he can sell them and make some profits.
If you had traveled to other countries, you will be familiar with the money-exchange booth at an airport. The booth where one replaces his money at hand with the one the country he is heading to has. The booth has a counter which shows different transaction rates for different countries’ money. A transaction rate represents the value of two countries’ money.
For instance, suppose someone has ten dollars, every single one of which has an equable market value of 10 Japanese Yen. Now, if he decides to buy Yen with all his dollars, he is exchanging currencies. Now, after some days or moments, if things take a little turn, and the price of Yen rises, he can sell all his bought Yen. Thus, he will end up having more money than he initially had. Now, the whole procedure is termed as currency trading.
What is Forex?
Forex is an abbreviated name for the foreign exchange market. It is commonly known as Forex but has other popular names, like the FX industry. The daily transaction amount and participants’ volume have made this platform the most phenomenal and the largest business around in the globe. Being an active CFD trader, you should check here and get the best CFD trading account at Saxo. Once you have secured a professional learning environment like the experts in the Mena zone, you can move onto the important details.
The first characteristic that should be highlighted while talking about Forex is its decentralized policy. It has no particular governing body and so exposes equal opportunity and risk to all people regardless of their geopolitical location and culture.
The second characteristic is its high volatility. This rates for every cash go through a massive scale of fluctuation. In Forex, even the slightest deviation in price is important. Depending on the scale, an investor invests his money, a change at the third or even fourth decimal position of a price can bring about large a profit or loss.
Though this it can happen in a different context, most of it happens in the global industry for certain speculative reasons. Speculators purchase currencies in order to sell them at higher prices in the imminent future.
You can easily imagine the vastness of the Forex market if it gets compared with the other share markets. One of the world’s biggest industry, the New York Stock-Exchange (NYSE) only execute about $22.4 billion in a day. Conversely, in Forex, the executed amount of transactions is nearly $6.6 trillion per day.
Can you comprehend the difference? The biggest and the largest stock-platform globally, the NYSE is an ever intimidating and awe-inspiring platform. This stock-trading giant platform seems like a petty toy when compared to the gloriousness of Forex. It is around two hundred times bigger than the other popular world markets.
Other platforms like retail trading, are even smaller. Many thought points at the third most defining characteristic of the market. That is its never closing schedule. The currency market is open 24 hours, 5 days a week. It’s like speculators only take sleep on weekends.
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