The Foreign Exchange market is an over-the-counter interbank market for the trading of forex currencies. This market determines international exchange rates for each currency based on the rate that is quoted in the market. It includes all facets of purchasing, […]
The Foreign Exchange market is an over-the-counter interbank market for the trading of forex currencies. This market determines international exchange rates for each currency based on the rate that is quoted in the market. It includes all facets of purchasing, selling and trading currencies in determined or current prices. Forex dealers or brokers can buy and sell currencies in this market from anywhere in the world while keeping a minimum of capital.
There are various different types of FOREX pairs trader. An example would be a speculator, who would trade with just one pair of currencies while holding the rest in brokerage accounts. A day trader would also be a FOREX trader. They would purchase a quantity of foreign currencies traded at a later date for a profit. There are also short-term FOREX traders who buy and sell foreign exchange currencies only to hold them for a day or two, making profits in the process.
One of the most common pairs traders will be the spot forex trader. This involves trading the spot price of one currency for another at any given time. For example, if a trader wanted to purchase a Japanese yen (JPY), they would obtain the spot price of JPY from an international exchange source and then place their order for a transaction. If for some reason, the Japanese yen became unprofitable for trading, they would sell it and obtain back the investment they made minus the transaction fee. This transaction would be recorded as a loss on their personal accounts for losses and fees charged.
The pairs that are traded on the FOREX market are separated into three different sections: the major pairs, the minor pairs and the cross pairs. The major pairs consist of the most commonly traded currencies such as the U.S. dollar (USD), Canadian dollar (CAD), British pound (GBP), Swiss franc (CHF) and Euro (EUR). The minor pairs consist of the currencies of the twenty nations that are members of the European Union (EU). These twenty nations include Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakiaak Republic, Slovenia, Spain and Sweden. The cross pairs consist of the currencies of Canada, Japan, Taiwan, Mexico, New Zealand, Norway, Panama and South Africa.
The major difference between the major and minor currency pairs on the FOREX market is the rate at which they are traded. The major currency rates are always higher than the minor rates. This is due to the higher demand on the exchange rate for these currencies and the fact that they are traded more often on the spot forex market. The minor currencies on the other hand, are usually lower in terms of exchange rate when compared with the major currencies on the FOREX market.
There are a number of reasons on why a trader would be interested in trading on the FOREX market. In this case, the trader would not be interested in the values as such but rather the movements of these currencies. If the trader is interested in watching the movements of the prices, he/she may be interested in buying low and selling high. The latter is what the trader would prefer to do.