Are you planning to ensure a steady regular income from your investment? Are you aspiring to earn potentially higher returns on your investments? Do you wish to compound your hard-earned money in the long run? Are you willing to accumulate your wealth for various life goals? If your answer is yes to any of these questions, you need to know about forex trading before investing your money in the market.
So, what is forex trading? You might have heard about this term but may be unfamiliar with its meaning. Therefore, we will try to provide you an insight into the forex trading market and its structure.
Forex trading market: An Overview
Forex is also known as foreign currency and exchange. It is a trading method in the financial market- where the selling and buying of money occur. Interestingly, the trade in the forex market occurs between two currencies. Let us understand it comprehensively. Suppose EUR/GBP is trading at 1/0.86. You decide to buy EUR 10,000 because you think the price of EUR/GBP will rise. This is called forex trading, in which currencies are traded to earn profit. In this, you bought one currency for another at the same time at an agreed price. Notably, forex trading is done for a variety of reasons, such as trade and commerce, tourism, or investment.
In the early years, the access to foreign currency and exchange market was with centralised banks, large institutions, or the wealthy. The arrival of online trading platforms changed the whole scenario of the forex market. At present, there are several online trading platforms where an individual can sell and purchase foreign currencies across the world, such as Pepperstone, Saxo Bank, eToro, CMC Markets, Plus500 and FXCM. Moreover, exchange rates for different currencies are monitored and controlled by the respective governments.
An insight into the structure of the forex trading market
Surprisingly, there is no central location or market for forex trading. The foreign currency and exchange trading transactions occur between sellers and buyers globally using computer networks through various channels.
The structure of the forex trading market is quite different from the stock market. In the stock market, selling and buying stocks occur through centralised exchanges (NSE, BSE or NYSE). In contrast, significant volumes of forex transactions appear in the Over-The-Counter (OTC) market. Admittedly, the OTC market is independent of any centralised system, unlike the stock market structure. Central Banks, Investment banks, Hedge funds, Major commercial banks, Insurance companies and Forex brokers.
In the forex trading market structure, significant banks are the major players. The transactions in the forex market are done directly or electronically through Electronic Brokering Services (EBS). Sometimes, governments and centralised banks intervene in the forex market to control volatility in the currency market.
In addition, forex trading is also famous for its liquidity, among other commodities. Now that you understand the structure of the forex market, start trading right away! You can also enrol in a forex trading course to acquire skillsets and gain expertise in the area. Apply now!
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