The forex market is the biggest traded market as far as the total cash value that is treaded is concerned. In this market, the currencies of the different countries are traded for a price.
Different banks, financial institutions, governments, multinational farms use this market to trade currencies and to make profits. When judiciously traded, this market generally provides a huge profit at short span of time. Hence, it is gaining popularity all over the world.
The forex market offers twenty-four hours trading a day. Hence, investors from all over the globe are able to use it.
They can trade from any place in there from any place due to the advent of the communication facility. As it is global market, the volume of transactions here is very high.
Nature of trading at the forex market:
The trading rate vary although very marginally. It is fact that there is no single market where the forex market operates.
Hence, there is different market price for the currencies traded at different market place depending upon the place and the currency traded. But usually there are only marginal variations as all these markets are interrelated anyway.
Although banks all over the world, take part in the currencies transactions, the main market places in the world are at London, Tokyo and New York. The different sessions of the European, Asian and US begins and end in a cyclic manner.
The prices of the currencies are dependent upon the microeconomic conditions of a particular country like the interest rates, gross domestic products, export and import conditions, inflations etc. The forex market is also basically dependent upon the money flow in real terms.
The different players who participate in the forex market are banks, financial institutions, different nationalised banks, the commercial companies, hedge funds etc.
With the advent of the globalisation of the economy, more and more banks and financial institutions are in need of foreign exchange to operate in other countries. Here, the forex market assumes greater significance.
Even the governments also are in nee of the foreign exchange and take the help of the forex markets. In fact, these big institutions make up the large operational share of the forex market.
Apart from the above-mentioned player of the forex markets, the small retail brokers and individual investors also make up a small part. They offer the foreign exchange at the counter and also online.
The retail traders at the forex market are at a disadvantage, as they do not possess the requisite knowledge to properly harness it. They also do not have the high capital necessary to really have an impact in the impact.
Hence, direct consumer participation in the forex market is very limited that way.
Since, the forex market is basically a speculative market, controversies regarding its transparency and their effects on the devaluation of particular currencies and the economy of that country is questioned many a times.
But, the proponents of a free market economy are in favour of the forex market.