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Trade
The foreign exchange market
Today the currency market is an electronic network linking most major stock exchanges worldwide. All traders must be registered, thus, the individual will have the opportunity to participate in the trade themselves.
The exchange takes place in the interbank market, where participants get the opportunity to conduct trading operations. If a person wants also wants to join the ranks of participants in the system, it will be necessary to use the services of the brokerage company. One can consider two variants of the functioning of the exchange process:
• When all transactions are made on the exchange
• When agreements are concluded, bypassing the exchange on the interbank foreign exchange market
Functions foreign exchange market
Functions foreign exchange market for the global economy:
1. Supply and demand form the exchange rate
2. The function of protection of subjects of economy from the speculative actions of the different parties
3. Performs the function of the state of the tool for conducting monetary policy
4. Enables efficient financial turnover (of all kinds payments in various currencies)
Under the currency operations" often refers to a complete cycle of exchange of one volume of the selected currency, for the remaining volume of other currencies, with the transfer of ownership rights is given to the currency of the other party to the exchange. Himself foreign exchange market is a place that allows you to exchange one currency for another.
The function of the global foreign exchange market:
1. The commercial function is to ensure market participants that a currency in which there is a demand
2. Valuable feature allows you to maintain a balance between the global foreign exchange market and the economic system as a whole, due to the exchange rate
3. Information function informs all market participants about everything that is related to the functioning of the structure
4. The regulatory function promotes the consideration of the peculiarities of all countries participating in the exchange, for compliance with the law of action
Risks in the foreign exchange market
Each sale made on the foreign exchange market, is the operation with high level of risk. Constantly changing course or that tool will not advantageous to carry out foreign exchange transactions. Any process of purchase or sale, can end the party trading in financial losses.
To protect their capital often use hedging. This method allows you to control the risks, protecting your investments. To this method of protection from financial losses running to all traders, including speculators, who work on short-term change in the exchange rate, with the purpose of gaining profit due to the difference in rates.
Currency market participants
Main participants of the currency market are legal entities, usually banks, large investment funds, of the Corporation. These participants make up more than 80% of the total market turnover. The remaining percent is individuals who usually carry out in the market of speculative transactions, with the sole purpose to earn on the difference of currency rates. These people work through brokers, who in turn receive authorization for direct access to a particular exchange.
On the market involved the following participants:
1. Central banks of different countries
2. Commercial banks
3. Currency exchange
4. Brokers
5. Enterprises that need support in a particular currency
The foreign exchange market there is state control, which performs the function of regulating the entire process of interaction between the market and its participants, and between participants of trade.
The structure of the market
If we talk about the exchange sector of the currency market, it is conducting trade under a separate exchange. The second option is the OTC sector, which represents the interbank exchange. The most common form of settlement is clearing. One distinguishes four types of foreign exchange market: exchange, OTC, urgent and routine.
The most significant from the point of view of the volume of trade is a futures currency market. In turn, the derivatives market can be divided into futures, which are most similar to traders, and forward. It should be noted that when operating in the futures market there is no real delivery of the currency in the exchange.
The world currency market as a structure:
1. The presence of an organizational mechanism that supports the functioning of the market.
2. Service of world trade
3. The currencies of different countries in the process of forming their current values due to supply and demand, become objects of international market assessment
The market is for speculators
For traders in the currency market in the first place is their place of work. The main goal pursued by the speculator is making a profit by predict the movement of a currency pair. The difference between the rates at the time of the purchase and sale of the trading instrument is the profit that people can get for themselves at the end of the agreement. As too small turnovers individuals, that in most cases they work through a brokerage company.
Speculators, as a rule, do not "make the weather" in the market is only part of it. The task of the trader is often not to influence the situation, but to be able to determine the vector of its development and to follow strong players that determine the future rate of the currency pair. Sometimes speculators in the foreign exchange market compared with parasites that cling to a strong donor. The comparison, though quite unique, but not devoid of meaning.
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| Category: Forex | Added by: (05.11.2017)
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| Views: 322
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