The Foreign Exchange Market or "Forex" is where currencies are bought and sold. Currency is the blood of local and global trade, and in a worldwide setting, different currencies need to be traded in order to make foreign business deals.
A country who wants to buy a commodity from another country needs to use the latter country's currency in order to purchase it. This means that the importer will have to exchange his local currency with an equal value of the exporter's currency.
A tourist from another country will need to have the currency of the country that he is visiting in order to make trade while on tour. This means that he will need to exchange his local currency into EUR based on the current exchange rate.
Such examples are some of the reasons that makes the Forex market the biggest financial market with the highest liquidity. Even the stock market is small compared to this giant. The absence of a central market place makes it all the more advantageous, as everything is done electronically over the counter, making it a highly global exchange.
It is open 24 hours daily at 5.5 days weekly, and the main financial centers of the world from London, New York, Tokyo, Frankfurt, Zurich, Singapore, Sydney, Paris, Hong Kong - are where these currencies traded across roughly all time zones. Once trade stops in New York, it starts in Tokyo and Hong Kong.
The Basics on the Spot Market
The Spot Market, the Forwards Market, and the Futures Market are the three means of trade in Forex. Currently, the latter two rely on the Spot Market. The Spot Market has become the biggest and the fastest because of electronic trade.
It is where the currencies are purchased and sold based on the existing price, which in turn is settled by supply and demand. A "spot deal" is when a deal is confirmed, wherein one party releases an consented currency amount to the counter party and gets a precise amount of a different currency at the consented exchange rate value.
A country who wants to buy a commodity from another country needs to use the latter country's currency in order to purchase it. This means that the importer will have to exchange his local currency with an equal value of the exporter's currency.
A tourist from another country will need to have the currency of the country that he is visiting in order to make trade while on tour. This means that he will need to exchange his local currency into EUR based on the current exchange rate.
Such examples are some of the reasons that makes the Forex market the biggest financial market with the highest liquidity. Even the stock market is small compared to this giant. The absence of a central market place makes it all the more advantageous, as everything is done electronically over the counter, making it a highly global exchange.
It is open 24 hours daily at 5.5 days weekly, and the main financial centers of the world from London, New York, Tokyo, Frankfurt, Zurich, Singapore, Sydney, Paris, Hong Kong - are where these currencies traded across roughly all time zones. Once trade stops in New York, it starts in Tokyo and Hong Kong.
The Basics on the Spot Market
The Spot Market, the Forwards Market, and the Futures Market are the three means of trade in Forex. Currently, the latter two rely on the Spot Market. The Spot Market has become the biggest and the fastest because of electronic trade.
It is where the currencies are purchased and sold based on the existing price, which in turn is settled by supply and demand. A "spot deal" is when a deal is confirmed, wherein one party releases an consented currency amount to the counter party and gets a precise amount of a different currency at the consented exchange rate value.
