Some of the participants in this market are simply seeking to exchange foreign currency for their own, such as multinational corporations which must pay wages and other costs in different countries to sell their products in. However, much of the market is composed of currency traders, who speculate on movements in exchange rates, like many others speculate on movements in stock prices. Currency traders try to take advantage of small fluctuations in exchange rates.
In the forex, there is little or no "privileged information". Exchange rate fluctuations are usually caused by cash flow and expectations on global macroeconomic conditions. Important news is made public if, at least in theory, everyone receives the same information simultaneously.
Currencies are traded against each other. Each currency pair is therefore an individual product and is traditionally noted XXX / YYY, where YYY is the ISO 4217 international code of three letters of the currency in which the price of a unit of currency is expressed XXX. For example, EUR / USD is the price of the euro expressed in U.S. dollars, as in 1 euro = 1.2045 dollar.
Unlike stocks and futures, forex is indeed an interbank, over-the-counter (OTC) market which means there is no single universal exchange for specific currency pair. The forex operates 24 hours a day throughout the week between individuals with forex dealers, forex brokers with banks, banks and the banks. If the session is ended the session in Asia and the U.S. session will start, so the currency can be continually in trade. Operators can react to news when it breaks, rather than wait until the market opened, as is the case with most other markets.
Average daily international forex transaction volume was $ 1.9 trillion in April 2004, according to the study of the BIS.
Like any market, it is a bid / offer spread (the difference between purchase price and selling price). Currency on major crosses, the difference between the price at which a market maker will sell ( "request" or "offer") to a major customer and the price at which the market maker will buy ( "bid" ) Of the major customer is minimal, usually only 1 or 2 pips. In the EUR / USD price of 1.4238 is a PIP le'8 'at the end. Thus, the supply / demand estimate of EUR / USD could be 1.4238/1.4239.
This, of course, does not apply to retail clients. Most individual currency speculators will trade through a broker who usually have a difference to Seedless say 3.20 (in our example 1.4237/1.4239 or 1.423/1.425). The broker like marketiva or FXOpen will give their clients often huge amounts of margin, which facilitates customers spend more money on the supply / demand spread. Brokers are not regulated by the U.S. Securities and Exchange Commission (because they do not sell securities), so they are not bound by the same margin limits as stock brokerage. They are generally not support the interest margin, currency, however, since the trades must be settled in 2 days, they will "relocate" open positions (again the collection of bid / ask spread).
Individual currency speculators can work during the day and trade in the evening, taking advantage of the market for 24-hour day.
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