Foreign exchange (FOREX Trade) is the exchange of one country’s currency with another country’s currency. Unlike other financial markets, the foreign exchange market has no specific location and no central exchange, but trades through electronic networks among banks, businesses and individuals.
Forex trading” is the simultaneous purchase of one currency in a pair of currencies and the sale of the other currency. Forex is traded in currency pairs, such as the euro / dollar (EUR/USD) or the dollar/ yen (USD/ JPY).
The foreign exchange market, also known as the “Forex” or “FX” market, is the largest financial market in the world, with an average daily turnover of more than $1.5 trillion in it — equivalent to all securities market transactions in the United States More than 30 times the sum.
From the nature of the transaction and the type of realization, foreign exchange transactions can be divided into the following two categories:
- Basic foreign exchange transactions to meet the real trade and capital transaction needs of customers;
- In basic foreign exchange Above transactions, foreign exchange derivatives transactions are conducted to avoid and prevent exchange rate risks or for foreign exchange investment and speculative needs.
The basic foreign exchange transactions that belong to the first category are mainly spot foreign exchange transactions, while foreign exchange derivatives transactions include forward foreign exchange transactions, as well as foreign exchange selection transactions, swap transactions, and swap transactions.
There are 2 main reasons for foreign exchange trading. About 5% of the daily trading turnover is due to companies and government departments buying or selling their products and services abroad, or having to convert the profits they earn abroad into the domestic currency. And the other 95% of trading is for profit or speculation.
For speculators, the best trading opportunities are always to trade those most commonly traded (and therefore most liquid) currencies, called “major currencies”. Today, about 85% of daily transactions are in these major currencies, which include USD, JPY, EUR,British Pound , Swiss Franc , Canadian Dollar and Australian Dollar.
This is a real-time 24-hour trading market, foreign exchange trading starts in Sydney every day, and as the earth turns, the business day of each financial center in the world will start in turn, first in Tokyo, then London, and New York. Unlike other financial markets, foreign exchange investors can react at any time to foreign exchange fluctuations caused by economic, social and political events, whether day or night.
Theforeign exchange market is an over-the-counter (OTC) or “internal bank”. “The trading market, because the fact that foreign exchange transactions are made by the two parties through the telephone or an electronic trading network, foreign exchange transactions are not like the stock and futures trading markets, which are not centralized in a certain exchange.