What comes into your mind when it comes to forex (foreign exchange)? Perhaps what you perceive is the noisy stock market, is it not?
Well, basically foreign exchange market has reputably the area of
government central and most of the commercial and investment banks. But now, let us focus on an individual usually discussing the forex market as he offers trading for almost 24 hours a day in seven days a week. This person handles the transaction between the persons making business making sure that the exchange is being completed and closed within the period prescribed.
There is also a concept that foreign exchange market revolves on
daily dollar volume and various currencies of several countries involved in foreign exchange trading.
What people should know about forex?
First of all, keep in mind that forex market and its investor trade from
one currency to another. Most of the investor come from different
countries worldwide that performs daily trading activity. It is important also to know that currencies are also quoted in terms of their price in another currency.
To further discuss, currencies are always quoted in pairs. The very
first currency is called the base currency while the second
currency is called as the counter or the quote currency. Let us say, if it takes 12.456 pounds to buy 2.345 dollars, the expression will be “dollars over pound.”
Now that currency has been discussed, it is about time to calculate the
so called “spread”. Forex quotes are always provided with bid and ask
prices. These two usually vary in terms of equity market.
Speaking of equity market, the price of the market share differs in
terms of forecast in equity market. In one way or another the price ask is the kind of price that forex market maker is willing to deal to other
It is very important to know that forex prices are always quoted using
five numbers like $ 0.0005 . Normally the prices vary each
day. The number of the traders affect the prices of the stocks.
Here are some basic terminologies usually encountered in forex trading. To understand further and be familiar with the lingo let us discuss them.
Currency– it is the fundamental capital in terms of trading.
Forex market– it is the world’s leading online currency broker place. Stock business is dealt by the traders in this place.
Settlement risk– An incident wherein one party fails to deliver the terms of the contract so settlement is agreed upon between the parties involved. Settlement is a risky issue and usually associated with default. Sometimes the terms of the agreement are not met so principal risk is undertaken.
Spot exchange rate– it is the rate of a forex contract for immediate
delivery. It is usually referred to globally accepted cycle for foreign
exchange contracts. Spot exchange rate should be settled immediately to avoid the rush especially when the deal has been closed.
Single Payment Options Trading (SPOT)– it is a type of product that
allows a traders/investors to set not only the conditions that need to meet in turn to receive a desired payout terms. The broker that provides this set of product arranges the payouts of possible investors.
SPOT Conditions– it is the agreed conditions set out by both
parties. The investors collects payment only upon perfection of agreement and if the condition set does not occur then the investor will lose the full investment paid to the broker.
Now that you are already familiar with the terms used in basic forex trading it will be easier for you to deal in forex market. Remember that a little knowledge regarding this matter is very risky. Learn first what is forex trading and how it works before getting involved in the business.