The forex market is the largest growing financial market with the highest liquidity. The term forex indicates “foreign and currency”. It also sometimes abbreviated as “FX”. Forex is another name of the currency market.
Forex trading is a short form of foreign exchange trading which represents the market in which one country’s currency is quoted against that of another country’s currency. Therefore provides the basis for the exchange of one currency with another, or to agree on a rate for any future purchase.
|Country A||Country B||Currency Pair|
While traveling to different countries, you need to exchange your own currency into that country’s main currency, in order to continue traveling, shopping, etc.
Suppose you are traveling to Australia from the United State, then you need to buy the Australian dollar with your US dollar.
Australian dollar gets quotes as AUD/USD against the US dollar. If AUDUSD’s current rate is 0.7656. That means if you convert $5000 US dollar to the Australian dollar, you will get $5000*0.7656 = 3828 AUD Dollar which you can spend in Australia.
This AUDUSD is a forex pair. Similarly, in the above table illustration, you will see the currency pair of GBPUSD. British pound gets quoted against US Dollar. In this case, if you travel to the UK, you need to convert the US dollar to pound sterlings.
It is not necessary that people convert currencies only during traveling. Currency conversion happens for all the global business deals, even if you need to buy a new mattress from China living in Cyprus. Then you will need to convert your Euro into Chinese Yuan (EUR/CYN). This way, forex currency exchange is mandatory or should we say the main lifeline for all international business transactions.
Forex Major Currencies:
Followings are the major forex currencies in this world:
|USD||United States of America||US Dollar||Buck|
|EUR||The European Union||Euro||Fiber|
|GBP||Great Britain / England / United Kingdom||British Pound / Pound sterling||Cable,quad|
|NZD||New Zealand||New Zealand dollar||Kiwi|
|NOK||Norway, Quisling regime||Norwegian krone||krone|
All these ten currencies are part of the G10 currencies, are the most heavily traded currencies in the world. The majority of the forex traders buy & sell these currencies on a daily basis. Thus it has the highest liquidity. The term “G” came from the G-10 countries and their agreement to participate in the IMF General Arrangements to Borrow.
Daily Forex Market Volume:
Just because forex transaction is essential for global business. Thus the forex market has a bigger trading volume than other trading exchanges. Bigger than Newyork Stock Exchange (NYSE), Tokyo Stock Exchange & London Stock Exchange.
Daily average currency trading volume is around $5.1 trillion as of 2017. It is increasing day by day. Because global business is improving day by day with better connectivity, online bank transaction, money transfer from one country to another.
For that reason, more forex transaction is getting executed per seconds or even in nanoseconds with lightning-fast speed modern technology.
Because of the bigger daily average trading volume, this market holds lots of opportunity for traders, especially for day traders or scalpers (reference chapter 2)
There are almost thousands of forex trading brokers available for investors to invest in the currency market. Big banks have their currency brokerage division also. Thus the forex market is the most liquid one.
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