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Foreign Exchange Market Short Form
Foreign Exchange Market short form is Forex or FX. It is a very big decentralized market with many different advantages, features, and pitfalls. It is also called Over the Counter (OTC) market for trading currencies. In the Foreign Exchange Market, all the foreign investors exchange foreign currency in both methods of spot trading and futures trading. Here trading one currency for another, for example, one can swap the British Pounds for the Canadian Dollar and these transactions can take place on the foreign exchange market.
Forex trading is legal in almost legal in all countries but some people and brokers are not following the laws. Foreign Exchange Trading is riskier due to high leverage and less regulation. In the currency market, this platform is playing an important role in currency exchange rates. The forex market is the biggest market in the world in terms of volume. The major player in this market is the international banks that are working on a currency conversion, buying, and selling. These financial institutions are the main dealers in this market and it is also known as the interbank market.
The forex market also plays an important role in buying and selling of goods, especially in import and export. With the help of this market, buyers can pay the amount in the currency of the source country instead of the US dollar. This market has some special features that are given below:
- It has the largest asset class in the world leading to high liquidity
- The low margins of relative profit
- It has a high trading volume
- This market has the highest trading hours
- It has various factors that affect exchange rates
- The use of leverage to enhance profit and loss margins and with respect to account size.
- It has geographical dispersion