FOREX: Trading in Currencies of Countries across the World

Foreign Exchange, popularly known as FOREX is a market where exchange of currency takes place between nations. Having no physical location, this market operates through a network of currency trading brokers. It is considered as one of the major financial markets in the world and operates round the clock. Here, one can find the entire world in trade round the clock, because if the market session ends for the day in one of the countries, the trading session starts in the other. So unlike the stock market, the traders can buy and sell currencies instantly or in other words react immediately in tune with the latest news in the global market without waiting for the market to reopen the next day.

Unlike the securities or the stock market, the FOREX market is not regulated by the U.S. Securities and Exchange Commission as foreign exchange is not considered a security. As in the case of stock markets, the trading in the foreign exchange markets takes place through bid price and ask price, where bid price is the sell price of the base currency and ask price is the purchase price of the base currency. Normally US dollar is used the base currency for almost all quotes except for Euro, British Pound and Australian Dollars. When the quote value goes up, it implies that the US dollar has strengthened as compared to the other currency.

Thus a rising quote means increasing value of US dollars and a falling quote means, lowering value of US dollars. However, the quote is just the reverse in case of Australian dollars, British Pound and Euro. Here, since US dollar is not considered a base and the country�s currency is itself considered as base, a rising quote implies falling US dollars and a falling quote implies a rising US dollars.

Thus there is a direct relationship between the quote value and the value of the base currency. Just like the securities market, it is very difficult to predict the price movement in FOREX market. However, you can analyze the fundamentals of a country from its GDP and employment reports, which can help you to have a clear knowledge of a country�s economic conditions and hence make an approximate prediction of the movement of the country�s currency.

Useful resources:

• Currency Trading – Forex Trading First develops and supports its own Online FX trading platform. The full range of Forex tools enables importers, exporters, and others with Forex exposures, to easily hedge their funds. It eliminates the need to download proprietary software.