Forex, is the acronym of Foreign Exchange (Interchange of Foreign Currencies). Also Market is known as the International Currencies. Therefore, if a day they are interested in investing in Forex, he is advisable to investigate if these types of companies own mercantile registries and the pertinent certifications to be able to develop this type of activities within a legality frame.
The market of foreign currency (Forex or FX) exists wherever a currency negotiates with another one (dollar/Euro, Euro/frees, dollar/frees, new sun/dollar). It is to a great extent greater market of the world, in terms of value of negotiated cash, and includes to negotiate between the great banks, the central banks, the multinational speculators of the currency, corporations, the financial governments, and other markets and institutions. The retailers retail (speculating small) are a small part of this market and can directly participate by means of dedicated companies to offer services of TRADING or indirectly through runners or the banks and can be white of swindlers of the currency.
The Forex Market is the Market the Currency International and is, with difference, the financial market more liquid, dynamic and lucrative of the world:
- Its daily volume of 2,5 trillones of dollars turns it to the USA into the most liquid Market. In comparison, esteem that the volume average operated by stock-market of Values greater of the world, stock-market of New York (NYSE) in a complete month, is equal to the volume that, daily, negotiates in the Forex market.
- Its operation the 24 hours of the day and turns at night it into the most dynamic Market. The market abre Sunday in the evening (hour of the coast This of the United States) and closes Friday to the 4:00 p.m. hour of the East. This allows that the investors have a constant access to the markets with the benefit of a greater liquidity and a capacity of fast answer to the economic and/or political events that have effect on this market.
- Its financing, highest of all the financial markets turns, it into the Market potentially more lucrative.
In FOREX, an investor can finance 99.000 USD by each 1.000 USD of margin that he has deposited in his account, this must to the leverages that exist when negotiating them through a Broker that can arrive up to 1/100, being able this deposit or margin to reach a potential of daily movement between a 100% and a 200%.
Market FOREX is the greater financial market of the world. When it was created, in 1977, the volume of daily business was of approximately 5 trillions of American dollars. Nowadays, this volume has ascended until the 2,5 trillones of daily dollars. Every day, trillones of dollars is negotiated, in different currencies, anywhere in the world.
- The operative one in the Forex Market consists of the simultaneous purchase of a currency and the sale of another one. The currencies are interchanged in pairs, for example, EURO/DÓLAR or DÓLAR/YEN.
Nowadays, 85% of all the transactions in the Forex Market include Dollar USD (USD), to Japanese Yen (JPY), Euro (EUR), to Sterling Libra (GBP), to Swiss Franco (CHF), to Canadian Dólar (CAD) and to Australian Dólar (AUD).
The operations are lead via investment platforms or by telephone. There is no a central location, unlike the bags. It is a true market 24 hours that begin on a daily basis in Sydney and it moves around the world, as the day begins, in each world-wide financial center: first Tokyo, soon London and finally New York.
Unlike the traditional financial markets, that reunite to buyers and salesmen under a same “ceiling” (the calls “TRADING floors”), the transactions in Market FOREX are not realised in a centralized location, but through Internet, computer science platforms of investment, terminals and telephone.
That is to say, market FOREX does not have an enclosure of negotiations and, for this reason, it says that it is a Market OTC (of the English: Over the Counter Market). Geographically, the “centers” of more important operations of the world are located in London, New York, Tokyo, Singapore, Frankfurt, Geneva/Zurich, Paris and Hong Kong.
In the currency market, the currencies negotiate in pairs. Each pair of currencies thus constitutes an individual product and traditionally is written down like XXX/YYY, where YYY is the international code of three letters ISO 4217 in which the price of a unit of XXX is expressed.
For example, EUR/USD is the price of Euro (EUR) expressed in American dollars (USD) like a 1 Euro = 1,3000 dollars American.
According to a study of TWICE, the negotiated pairs of currencies more were:
EUR/USD – 28%
USD/JPY – 17%
GBP/USD (also call cable) – 14%
The American Dollar was involved in 89% of the trasacciones, followed by the Euro (37%), the yen (20%) and the pound sterling (17%).
The great international banks provide to the market the prices with purchase (I.A.D.B.) and sale (ask). Spread is the difference between these prices. Generally spread in negotiated currencies more is of only 1-3 pips or basic points. For example, the I.A.D.B./ask in a EUR/USD quote could be 1.2200/1.2203.
At the moment cualquie natural person can have access to the world-wide currency market (Forex) through the Brokers, that would come to be like the “intermediary banks”.
It is important also to know that to invest in Forex it is an activity of much risk, because as well as much money can be won, also is possible to be lost much money if we are not preparations, and happens until to the professionals. In the end to win in Forex one is transformed in knowing how when to buy and when to sell a currency.
