The FOREX is a combination word for the Foreign Exchange. It is a market for trading global currencies, commonly on the margins.
The Forex is also known as the FX or currency market. These trades are often brokered through large international mega banks, but other global financial centers delineate the trades in various ways and methods to buyers and sellers.
These transactions are delivered on a twenty four hour basis and are only inoperable on weekends. The very weight of the immense trading has the effect of determining relative global currency values. Financial institutions participate in the market based on their size and influence. The largest global financial institutions that are able to handle a high frequency and large quantities of Forex trading will then broker those trades to smaller financial institutions.
Global mega-banks/ Dealers
These main financial institutions fill the role of the dealer in Forex trading. There are other financial entities involved, but the primary players in the Forex market are large banks and their supporting, smaller financial institutions. It is for this reason that this part of the Forex system is called the interbank market.
The dealer’s trading may involve very large deals that often total a quarter billion are more. Because the volume of trades is so large, and the trading involves more than one sovereign nation’s currency and jurisdiction, these trades are very hard to regulate and inspect by any governing authority.
Forex Global Relevancy
However, they do perform a valuable for function for global trade and international transactions. The Forex allows international trades and investors of any size to make transactions in one currency and have that currency automatically converted into the other international currency that is being used. This means that currency does not have to be physically converted into other forms of currency to complete international transactions.
Traders are able to speculate by determining how global trends and events will affect certain countries and their currencies. The profit is derived from the deviation in interest rates between the two currencies being traded.
These trades are low profit with very high risks. This means the Forex favors large intuitions and conglomerates that can not only handle the potential downsides, but that are also able to influence the outcomes by their influence and size. However, it is favored by these institutions because it facilitates these institutions in accessing high liquidity rates and it is open continuously around the clock.