Forex currency trading takes place all over the world and is the largest financial market in the world. The main players in the currency market are the country’s central bank, the major commercial banks like Citibank and Bank of America etc, multinational companies. The major part of the business is speculative trading but only 5% of business is correct currency. The daily volume of trade is worth $ 3200000000000.
Although forex currency trading can be done in any currency, 85% of business is done in major currencies. The main currencies are US Dollar, Australian dollar, Canadian dollar, British pound, euro, yen and Swiss franc. The US Dollar account for nearly 28% of the total foreign exchange market.
OTC market operating 24 hours a day
There’s OTC market or over the counter market, forex currency trading is done in pairs. This means that the USD would be sold to buy the Japanese Yen or Swiss francs would be bought and sold euros respectively. The Forex market has no centralized exchange and is exclusively via telephone and the electronic medium, including the internet.
There is a 24 hour market and major business centers are Sydney, Tokyo, Singapore, Hong Kong, London, Frankfurt and New York. Investors will usually respond to changes and fluctuations in the currency market immediately, unlike stock and commodity markets. The changes are shown on the screen every second. Offers are made on a second to second basis.
Forex currency trading is always done in pairs and spread profit
The Forex trading quotations are also given in pairs and the bid and ask prices are always mentioned together. The pair USD / JPY, USD is the base currency. The Forex currency trading happens in foreign pairs USD is known as cross-currency transactions. Fundamental and technical for trading each currency pair are different.
quote for USD / JPY is always given as 110.3456 / 110.3450. This means 1USD can sell for JPY 110.3456 and 110.3450 JPY would have to buy 1USD. In forex currency difference between bid and ask prices is the spread, or profit that forex traders make.