Forex is the short form of foreign exchange. It is the largest market of foreign exchange where you can buy or sell foreign currencies over the counter. Unlike all the other markets the transactions of forex are conducted over the telephone or through online web system.
In the beginning the forex market only deal with the large investors, international commercial or investment banks, national and international corporations and with multinationals, but now with the online forex trading, the market is now open for people with smaller capitals and investments too. You can visit http://www.forextime.com for starting your own business.
The task of the forex is to interchange your currency to another, with the assumption that the value of the currency will increase. So that the currency you purchased will increase in value, compared to the one you sold. For example: you bought 4 pounds, with pounds/dollar exchange rate of 1.2 i.e. you spend 4.8 dollars. Later you sell 4 pounds with the exchange rate of 2.1, i.e. you will get 8.4 dollars, and i.e. you gain a profit of 3.6 dollars.
Activity of forex:
Forex markets are usually the busiest markets, the transaction are made all day between the London market opening times, i.e. 8:00 to us closing time, i.e. 22:00. But the, but the most crucial or busiest time is between 13:00 GMT to 16:00 GMT. It is the time when most of the traders are available in the market and when most of the transactions are made.
The whole activity of forex is divided into 3 major sessions:
1. London session:
The London session starts at 8:00 and ends at 16:00, this session mostly deals with the exchange of EUR, GBP, and USD.
2. The US session:
This session starts at 13:00 and ends at 22:00, during this time, the most active currencies are, AUD, EUR, GBP, JPY, and USD.
3. Asian session:
It’s the slowest trading session of a day; the only active currency is JPY. The transactions are quite slow until or unless there is major financial change or situation.
The major currencies or the most dominating currency of the forex market are:
- The US dollars.
- Japanese yen.
- Swiss franc.
- British pound.
How to deal a forex market:
The most important thing to do in a forex market is to make quotes. Below are the tips that will help you read quotes, and how to deal with them?
In the whole transaction you actually deal with two currencies, you buy one and you sell one, therefore the quotes are always written in pairs. For example like, GBP/USD. The currency on the left side is known as the base currency, while the other one on the right side is called the counter currency. The exchange rate determines how many units of counter currency you have to pay in order to buy the base currency. and for selling the exchange rate tells you how much of the counter currency you will get against the per unit of the base currency.