What is Forex Trading: Definition, Transactions, How it Works and Tips for Beginners
What is Forex Trading: Definition, Transactions, How it Works and Tips for Beginners - Foreign exchange trading or foreign exchange trading is usually abbreviated as buying and selling foreign currencies. The launch of Investopedia, forex trading includes currency adjustments between countries, especially for trade and tourism needs.
Forex trading forex trading. The buying and selling of currencies can also occur due to the need for foreign currencies such as debt payments, exports and imports.
Citing data from the Bank of National Settlement (BNS) operated by the Federal Reserve Banks of the United States (US), in 2016, the daily volume of transactions in the foreign exchange market was more than 5.1 trillion US dollars.
For comparison, the volume of transactions on the world's largest stock exchange, the New York Stock Exchange, is only stuck at the level of $22.4 billion per day.
This phenomenon confirms that even if transactions on exchanges around the world are combined, the value will not exceed transactions in forex trading. Plus non-stop forex trading for 24 hours affects the speed of money.
This system differs from stock trading which is only applied during business hours in accordance with the regulations of stock exchange authorities in each country. These rules make stock trading more restricted.
In forex trading, there is no official reference for determining the values of currencies, it all depends on the strength of supply and demand. Indeed, in some cases, a number of parties can influence the movement of forex trading.
However, moving the market requires quite a lot of money. Many things that affect foreign exchange rates include interest rates, oil prices, as well as geopolitical and economic conditions.
As an illustration, when the Federal Reserve or the Central Bank of the United States wants to lure the world's circulating dollars back to their countries, they will raise their benchmark interest rates.
In such conditions, the demand for the US dollar will increase significantly. As a result, the value of the currency will strengthen against other currencies.
For forex investors who have US dollar deposits, they will of course benefit when selling at a higher rate.