Posts Tagged ‘international market’
The Forex market (Foreign Exchange Market) is an international market where currencies are bought and sold a large scale.
In this market transactions are made up of trillions of dollars a day, being the largest and most liquid market in the world followed in second place by the stock market.
This market is completely electronic and operates through financial centers around the world, but they do not have stable physical locations; reason operates 24 hours a day, although only five days a week not including late week.
In this Forex market previously only served by private central banks and big investors, but today because of the Internet and other means, anyone can buy and sell currencies in him, even indirectly through a broker.
In Forex each currency is represented by a code composed of three letters, such as the U.S. dollar is represented by the letters USD.
Major currencies traded on Forex are the U.S. dollar (USD), euro (EUR), Japanese Yen (JPY), British pound (GBP), Swiss Franc (CHF), Australian dollar (AUD), and Canadian dollar (CAD).
The Forex trades involve the simultaneous purchase and sale of two currencies, so the Forex currency pairs are displayed; the most common pairs (being the most liquid) are EUR/USD, USD/JPY, GBP/USD, USD/AUD, USD/CHF and USD/CAD.
The motto that appears to the left of the slash “/” is called primary or base currency, and is being purchased, while the currency on the right is called a secondary currency, and is sold (with which you buy the first one).
For example, to buy Euros and sell dollars, in terms of Forex, we would buy EUR/USD, where the euro is the primary peel, and the dollar high school.
Currency pairs are followed by a number, usually consisting of five digits with a decimal point after the first.
This number is the exchange rate, which specifies how many units is secondary currency needed to buy a unit of base currency, for example, EUR/USD 1.2550, means that they need $ 1.25 to buy one euro.
An example of an operation in Forex, suppose we forecast that the euro (EUR) is going to appreciate against the dollar (USD) and, therefore, decided to buy Euros with dollars to pay (to buy Euros and sell dollars).
Suppose the euro is trading at $ 1.30 (EUR/USD 1.30), and decided to buy 1000 Euros, so we pay 1300 dollars (1000 x 1.3).
After a few weeks, it appears that our forecast was correct, and the value of the euro rose to $ 1.40 (EUR/USD 1.40), so we decided to sell our Euros and buy dollars again.
Therefore, sell the 1000 Euros that we, as your quote is $ 1.40, received 1400 dollars (1000 x 1.4).
So our profit will be 100 dollars (1400 dollars that we have now, minus the 1300 dollars that we had initially).