Foreign Exchange Trading - An Overview

Foreign Exchange Trading - An Overview

Foreign Exchange Trading - An Overview

Foreign exchange trading market is a market, where currencies of different economy are traded. Here, currencies are bought and sold against each other's value. This trading market is the largest market in the world, as over a thousand billion dollars are traded in a single day.

The foreign exchange trading market is an OTC, over-the-counter market, as it has no centralized particular place or office where the trading process is carried. The market is a world spread network of interconnected traders containing a number of banks connected to each other through telephone and Internet. The worldwide process of foreign exchange trading is hugely possible due to the development in the electronic field.

Why study Foreign Trade?

The quantity of foreign trade is large as almost all countries of the world trade their goods and services. They borrow and lend various goods. They also invest and accept investment help from other countries for the improvement and advancement of the economy. Foreign trade is an activity, which helps the countries to obtain the good and distribute them to other countries. Trading between two countries is equal to domestic trading.

However, the currency system utilized in the domestic trade is the same, but in case of the foreign trade, the currencies vary. Thus, there is a lot of calculation involved in determining the values of currencies included in the foreign trading process. Hence, studying the techniques and gathering information related to the foreign trade is mandatory to reduce the certainty of risk in the business.

The Foreign Exchange Trading market may be divided into two parts, the retail market and the wholesale market. In retail market, travelers exchange currencies of their currencies for another, these currencies are exchanged for the currency notes or traveler's cheques. The quantity of business and the turnover in this market is small, but the difference between the buying and the selling price is more.

On the other hand, the wholesale market, which is also popular as inter-bank market is a market where the transaction amounts are large, as the part takers are present in a large number.

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