Forex trader meaning
The foreign exchange market is the "place" where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business. If you are living in the U.
This means that the U. The same forex trader meaning for traveling. A French tourist in Egypt can't pay in euros to see the pyramids because it's not the locally accepted currency. As such, the tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate. Forex trader meaning need to exchange currencies is the primary reason why the forex market is the largest, most liquid financial market in the world.
It dwarfs other markets in size, even the stock market, with an average traded value of around U. The total volume changes all the time, but as of Augustthe Bank for International Settlements BIS reported that the forex market traded in excess of U.
One unique aspect of this international market is that there is forex trader meaning central marketplace for foreign exchange. Rather, currency trading is conducted electronically over-the-counter OTCwhich means that all transactions occur forex trader meaning computer networks between traders around the world, rather than on one centralized exchange.
The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney - across almost every time zone.
This means that when the trading day in the U. As such, the forex market can be extremely active any time of the day, with price quotes changing constantly.
Spot Market and the Forwards and Futures Markets There are actually three ways that institutions, corporations and individuals trade forex: The forex trading in the spot market always has been the largest market because it is the "underlying" real asset that the forwards and futures forex trader meaning are based on. In the past, the futures market was the most popular venue for traders because it was available to individual investors for a longer period of time.
However, forex trader meaning the advent of electronic trading and numerous forex brokersthe spot market has forex trader meaning a huge surge in activity and now surpasses the futures market as the preferred trading market for individual investors and speculators.
When people refer to the forex market, they usually are referring to the spot market. The forwards and futures markets tend to be more popular with companies that need forex trader meaning hedge their foreign exchange risks out to a specific date in the future.
What is forex trader meaning spot market? More specifically, the spot market is where currencies forex trader meaning bought and sold according to the current price.
That price, determined by supply and demand, is a reflection of many things, including current interest rates, economic performance, sentiment towards forex trader meaning political situations both locally and internationallyas well as the perception of the future performance of one currency against another. When a deal is finalized, this forex trader meaning known as a "spot deal". It is a bilateral transaction by which one party delivers an agreed-upon currency amount to the counter party and receives a specified amount of another currency at the agreed-upon exchange rate value.
After a position is closed, the settlement is in cash. Although the spot market is commonly known forex trader meaning one that forex trader meaning with transactions in the present rather than the futurethese trades actually take two days for settlement. What are the forwards and futures markets? Unlike the spot market, the forwards and futures markets do not trade actual currencies.
Instead they deal in contracts that represent claims to a certain currency type, a specific price per unit and a future date for settlement. In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves.
In the futures market, futures contracts are bought forex trader meaning sold based upon a standard size and settlement date on public commodities markets, such as the Chicago Mercantile Exchange. Futures contracts have specific details, including the number of units being forex trader meaning, delivery and settlement dates, and minimum price increments that cannot be customized.
The exchange acts as a forex trader meaning to the trader, providing clearance and settlement. Both types of contracts are binding and are typically settled for cash for the exchange in question upon expiry, although contracts can also be bought and sold before they expire. The forwards and futures markets can offer protection against risk when trading currencies.
Usually, big international corporations use these markets in order to hedge against future exchange rate fluctuations, but speculators take part in these markets as well. Note that you'll see the terms: FX, forex, foreign-exchange market and currency market.
These terms are synonymous and all refer to the forex market. Introduction to Currency Trading Forex Tutorial: What is Forex Trading?