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What is Forex

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What Is Forex

Foreign exchange market is the center of attention of several markets and industries. These include, precious metals like gold and silver, banks, finance sector, FMCG products, FMCG foods, Institutional investors, corporate giants, individual investors and traders, brokers and many more.

Forex and FX are both abbreviations for “Foreign Exchange”; it may also be called the currency market, the foreign currency market, the currency trading market and etc. The Forex market is where banks, international corporates / organizations, governments, investors and traders come to exchange and speculate on currencies.

Forex is considered as the world largest and most liquid-able market in the world with an average daily turnover of over USD $5trillion dollar as the business days continues.

As we understands that Forex market is the origin market places for all activities that involves currency transaction, it is also commonly understood that there will be no central marketplace for the Forex Market; trading is instead said to be conducted “over the counter” unlike other investment such as stocks where there is a central marketplace with all orders processed like NYSE. All Forex currency pricing are all quoted by all the major banks and not all banks will have the exact same price. The brokers shall be taking the average feeds from all the banks or liquidity provider.

As the business transactions from all levels organizations from each country, currencies will be bought and sold just like any other commodities and its value shall increases and decreases depending on the economics movement of each nation; this is where Forex comes into place as the fluctuation of currencies price will be the main target for Forex investor, traders or fund manager to focus on for their investment as they place their trades between the currencies and gain their respective profits.

There is not free money or easy money in this world especially in Forex as everyone commonly understands that there will be no free lunch unless one was born with golden spoon. Surely it is very likely to make consistent money or profit in the forex market, and it can be a relatively easy way to augment the monthly income if a trader uses the right approach and with the right mindset. The first thing that each trader must embed in their mind is to make profit or money in Forex with consistent paste instead of always aiming for huge gains followed by huge losses. Traders will need to be always be aware of their emotions and make sure their trading routine is consistent and that it reflects their consistent mindset (*Emotional Control in Investment). The reason is because it will be easier for them to diagnose their mistake and to find out the next best approach to be able to continuously making profit and covering losses.

In order for a trader to learn to make money in Forex, he must also learn how to trade effectively and must learn an effective trading strategy that isn’t too complicated. Once he does this, he will have to actually learn to manage himself in a responsible manner in the markets. This means constantly being aware of his emotions and actions, and making a Forex trading plan and keeping a Forex trading journal. Traders who don’t do these things are typically going to lose money, sooner or later. The best way to learn how to trade the markets is to obtain training and guidance from an experienced and successful Forex trading mentor, just as learning any any other skills or profession is best learned from a mentor as well.

FOREX PLAYERS WITH LARGEST MARKET SHARE

COMMERCIAL BANKS- Commercial banks hold a great share in the forex market. They are major forex players due to their utmost participation. Their market share at the moment is 43%.

INVESTORS (INSTITUTIONAL):

The second largest group of investors is that of the institutional investors. They hold 30% share of the overall forex market. Major institutional investors are: hedge funds, investment firms, insurance companies and pension companies.

CENTRAL BANKS:

Central banks hold 10% share of the overall trading volume. They are the key forex players because they can intervene to defend their currencies.