subject: Activity In The Forex Market [print this page] When it comes to the trading game, probably the largest financial market that we can engage in is spot forex trading and according to the Bank for International Settlement, trillions of dollars are traded here on a daily basis. Because the amount of money traded here is so large, it surpasses the trading equities of both the US and UK. Foreign exchange trading has more than doubled since 2001, as forex has gained credence as an asset class with hedge funds, as well as among more traditional fund managers.
It is not possible to trade single currencies in this market. When it comes to currencies, it can either appreciate or depreciate. The buying and selling action of traders greatly depends on their knowledge when it comes to the appreciation-depreciation concepts.
The equity trade happens on an exchange but this does not. Instead, forex trading is conducted on an over the counter or OTC basis. This kind of trading can both be direct and indirect but any trade leads to a price and contract.
Available today is a very direct mode of trading currencies and this is called spot forex trading and it usually takes a transaction about two days to be fully accomplished. These banks trade on behalf of clients, for either transaction related or purely speculative purposes, and for their own book, and their size means they effectively act as the ultimate market makers, setting the bid and ask prices, which form the basis of pricing across the world. You will not find any centralized exchange in this case allowing for varying rates.
One's access to the narrowest spreads in this particular form of trading is reserved for those who are able to participate in the interbank market and this is where everything, the buying and the selling, highly depends on bid and ask prices. Thanks to the growing volumes of retail trade, pooling transactions is a common activity that brokers resort to allowing them to trade with better prices.
Traders can make use of retail spot forex spreads when necessary. Quotes serve to provide the trader with information pertaining to the value of currencies for buy and sell actions.
The forex market is tremendously large and non-stop trading can be expected from its participants. What you get here is the chance to get in and get out of the market in an instant. If you profit from this trading avenue then you should expect to pay a capital gains tax.
Be mindful of the trends that take place when it comes to the forex exchange since the rates can easily change. In this case, a gut feel on the movement of currencies can lead to the rise or fall of a currency pair.
Most currency pairs move on average less than 1 per cent on a normal trading day. With one percent of daily changes, what is so attractive about this kind of trading?
Here is where leverage can be an advantage. Earning a profit is always possible here even if you trade small and this is because of modern trading platforms and techniques. This ensures that investors can control a much larger position than would otherwise have been possible, with the broker effectively lending the rest.
