Familiarization with forex trading
If you have never heard of the term forex before, you should know that it is a short term for foreign exchange. Some people refer to it as FX as well. After reading the term foreign exchange, there might be a possibility that you have read it somewhere even if you do not have an idea about it.
Foreign exchange is a popular term, especially for traders. However, it is not just for trading alone. It is also for other purposes like business, school, tourism, and a lot more. It is a form of trading that stands out from other trading. The Bank of International Settlements, also known as the national central banks’ global bank, forex boasts an average of more than $5.1 trillion trading volume in a single day. Given this fact, we can say that forex is very liquid. In fact, it the most liquid and the most massive asset market in the whole world.
Citing scenarios when a person needs to do a currency exchange
Foreign exchange is somehow self-explanatory with their given name. It refers to trading currencies. It is a worldwide marketplace where people exchange one national currency for another and vice versa.
As we have mentioned, there are plenty of reasons why a person would want to exchange their currencies aside from trading alone. Let’s say Jack is from the Philippines but moved to the US to start a career. However, Jack misses eating a local delicacy called uraro. Since he now resides in the US, the currency is US Dollars. If he wants to buy the authentic uraro from the Philippines and have it imported to the US, he has to pay for it in Peso since it is the local currency. The seller who will import the uraro will have to convert its amount from Philippine Peso to the equivalent US Dollar amount.
Now, Jack travels to China on his vacation. Before leaving the US, he has to exchange some US Dollars because China’s local currency is Yuan. Most stores will not accept US dollars unless you pay with your card in malls or stores that accept cards.
Tell me more about foreign exchange.
Forex is unlike any other type of trades. There is no central market, but currency trades happen electronically and over the counter. Furthermore, due to global advancement, all transactions only occur with the help of computer networks that connect traders from all over the world and not just one single market. One thing more, the forex market somehow does not sleep and rest. It continues to run 24 hours a day and 5.5 days a week.
The major financial centers are London, Tokyo, Zurich, New York, Frankfurt, Singapore, Paris, Sydney, and Hong Kong. People trade in these currencies worldwide across almost any time zone. The reason why the forex market practically never rests is that countries have different time zones. Say one country’s trading day closing is just the opening of another country’s trading day. As a result, the market prices change quickly.