Currency trading also is known by the name forex trading is one of the largest trading markets across the world. It is a decentralized global market where all the currencies of the world are traded. It is a network of sellers and buyers who trade in currency amongst each other. It is a medium for converting one currency into another currency. Generally, a forex transaction is made when you travel to another country. The siby Varghese top Forex trader helps you to trade in forex.
Currency conversion is done either for practical purposes or with the aim of earning a profit. The volume of currency that is converted every day can make the currency market highly volatile. The volatility of the forex market attracts traders to trade in currency. The volatility of the market increases the chances of profit which also increases risk.
Working in the currency market
- The currency market is different from stock market as the trading is not done on the basis of exchanges.
- Currency market trading takes place directly between two individual parties where one is a buyer and the other is a seller.
- The trading in the currency market is done in an over-the-counter market generally known as OTC.
- The foreign exchange market is operated through a global network of banks across the world.
- The trading centres of foreign exchange is spread in four locations.
- There is no central location and hence trading in foreign exchange can be done throughout the day.
Different types of the forex market
- Spot forex market: This type of forex trading is done by physically exchanging two currencies. The exchange of currencies is done at the same time when the trade is finalised i.e; one the spot. It can also be done within a short period of time after the settlement of trade.
- Forward forex market: Forward forex trading is one where the transaction of exchange is set in the future. The buying and selling of the currency are done through a contract where the agreed parties specify the details of the transaction. The terms of the contract include the amount to be converted, price at which the amount will be converted, date on which the transaction will take place, etc. These contracts do not hold legal bindings.
- Future forex market: These are similar to the forward forex market. The parties involved in trading enter into a contract to buy and sell a specific amount at a future date. However, unlike forwarding forex these contracts hold legal binding.