The continuous process of exchange of one foreign currency for another due to a number of factors - from the calculation of conditions for contracts concluded between transnational corporations, to obtain bank loans at lower interest rates.
In connection with an ongoing need for foreign exchange emerged a unified telecommunications network that allows millions of buyers and sellers of currency exchange transactions around the clock from any point of the globe.
The combination of conversion operations on exchange rates in the world became known as FOREX (Foreign Exchange Market-International Monetary Market).
In the process of formation of the foreign exchange market, there's a new kind of business, which is based on extracting profits from exchange rate differences in a free and permanent changes in exchange rates. This change in exchange rates driven by market conditions and is regulated only by demand and supply. Investors who have committed such transactions are known as traders (traders). Currently, anyone can try yourself as a trader in the international currency market. She started her career as a trader in the financial market can be any age, with education and prior work experience do not have a significant impact on the success of the trader, as the innate analytical skills and ability to feel, to some extent the behavior of the market.
The modern view on the FOREX market
Over the past three decades, FOREX market has developed into the largest financial market in the world, whose daily turnover is from 1 to 3 trillion dollars. The main currency in this market are U.S. dollar (USD), euro (EUR), Japanese Yen (JPY), Swiss franc (CHF) and British Pound (GPB). Participants in the foreign exchange market are banks, multinational corporations and export-import firms, foundations, and individual investors. Currently, millions of people around the world conducting commercial transactions on the foreign exchange market and profit from fluctuations in foreign exchange rates.
Transactions on the FOREX market today are a major source of income for banks and financial institutions worldwide. For example, 80% of all profits in the largest Swiss bank Union Bank of Switzerland (UBS) in 1994 amounted to conversion operations with foreign currencies, and only 20% of all profits made from the proceeds of loans and securities trading.
Of course, the exchange of currencies of different countries was carried out since the emergence of the concept of "money" and the idea of making a profit from the difference in exchange rates is not new. However, the transformation of the global foreign exchange market in the modern form, with the possibility of conversion of such a significant volume of transactions has been made possible only after the introduction of the States parties to the International Monetary Fund, the regime of floating rates. Under this regime the course of one currency relative to another is determined by a balance of supply and demand in the current time. Courses freely convertible currencies are not fixed, but change every second.
Today's Market Forex - a single telecommunications network connected between the banks and other financial institutions, not having a particular place and time of trade restrictions - bidding starts on Monday morning in New Zealand and closed on Friday evening in the U.S.. Market participants can be anyone, regardless of its location, as well as for operations in the market need only internet access and the necessary knowledge.
The main advantages of the FOREX market
Liquidity. FOREX market operates huge money supply and provide full freedom for the execution of commercial transactions of any amount for the current price at the moment.
Leverage. The main difference between working in the FOREX market to work in other sectors of the financial market is the ability to purchase and sell foreign currencies in the absence of the full amount necessary to carry out operations. To conclude the transaction the customer must make only the initial payment (collateral margin), after which it can enter into transactions, which may be ten times more than the money actually invested. This so-called loan "shoulder" (leverage). For example, placing the account 10 thousand dollars with 1:100 leverage, you get the right to perform operations on the $ 1 million.
Hour access. The ability to perform commercial transactions 24 hours a day.
Global and ubiquity. Implementation of the trade is available from anywhere on the globe where there is an opportunity to connect to the Internet.
The lack of fees. Our company does not charge a commission for the holding of trade transactions in the market FOREX.
Example of operation
In the trading accounts of companies - 700 U.S. dollars. With the leverage of 1:100, which is provided to you automatically and free of charge, you can perform operations up to 70000 dollars.
After carefully analyzing the current market situation, examine the need for analysis, you concluded that, in the course of the next few days the British pound (GBP) against the U.S. dollar (USD), is likely to grow.
Based on the findings, you buy a certain amount of British pounds (for example, 30000 GBP) for U.S. dollars at the exchange rate of 1.9800 USD per 1 GBP (respectively, you pay 59,400 USD). The next day the pound against the dollar actually rose to values of 1.9950 USD per 1 GBP, and you made the reverse exchange, you have sold 30,000 pounds at current rates. The amount you receive as a result of the reverse exchange, will be 59,850 U.S. dollars.
Your net profit arising from the transaction will be 450 dollars (59850 - 59400).
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