Currency Buying Selling
Regarding the buying and selling of currency on foreign exchange, it is very important to know exactly all about the FOREX market and its rules and regulations.
This will give you advantages on what kind of venture you are dealing with.
The FOREX Market
The largest market in the whole wide world is the FOREX market. The average volume of the daily trading has reached to almost $2 trillion in the year 2004 according to the survey made by the Bank for International Settlements. A lot of traders who invest there really profit from the excellent liquidity in the FOREX market. Its growth has been significantly pushed upward by the high technology of electronics and internet trading as well as the increase in the globalization.
Generally, the FOREX market centralized on the trading of currencies by large banks as well as individuals alike all over the world. The trading of currencies is done over the counter. This adds to the liquidity of the market and also allows a 24 hours trading. Nearly all the currencies in the world can be traded however, there is a small group used in most of the trades called “majors”. “Majors” include the Euro, U.S. Dollars, British Pound, Swiss Franc, Japanese Yen, Australian Dollar, and Canadian Dollar. They are quoted in pairs.
The Trading Way
When there is a trade in the FOREX, it means that an individual is purchasing one currency in pair while the other individual is making a sell of the other. Despite the fact that the positions traded in here are often higher than 100,000 currency units, only a little of that total position comes from investors and the others are given by a broker that offers leverage necessary in trading. Traders hope to make a profit by taking a chance that the value of a currency will either depreciate or appreciate against the other currency. For instance, you have bought US$100,000 through selling your 80,000 Euros. This means that you are hoping that in the near future, the value of your purchased dollars will increase against Euro. If this happens you will definitely make a profit. To be able to collect the said profit, your position must be closed. You must sell your bought US dollars and receive more than the 80,000 Euros you have sold.
Generally, it is not necessary for the traders to settle exactly on the delivery date that usually comes in just 2 business days after opening the position. They can roll over it on the next delivery date available. Nevertheless, if he undertakes this route, he will be left open to future charges depending on the position and the difference between the 2 paired currencies and the interest rates.
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