subject: Active Forex Trading [print this page] Each day, there is about two trillion dollars that end up being traded off in spot market trading which according to the Bank for International Settlement is the largest financial market today. Combining the trading equities of the US and UK is still inadequate to match the amount of money traded here. Nowadays, fund managers are paying attention to the workings of the forex trade because this avenue of trading has been through a lot of profitable changes over the past ten years. It is important for currencies to be traded in pairs here. Here is where you need to concern yourself with the appreciation or depreciation of currencies. The buying and selling action of traders greatly depends on their knowledge when it comes to the appreciation-depreciation concepts. This is where there is no exchange that takes place like with equities. Such a trade takes place over the counter or on an OTC basis. Buyers and sellers agree a price and contract with one another directly, or through brokers and market makers.
Today, we have an efficient currency exchange system that takes two days per transaction and this is what will be discussed in the article, spot forex trading. The trade runs on the determination of bid and ask prices that the banks usually do and they do not only transact for themselves but do so for a long client list as well making them the ultimate market makers. From broker to broker, the rates may vary here since there is no centralized exchange.
If an organization is strong enough that they can participate in the interbank market then they can take advantage of access to the narrowest spreads wherein the buy and sell actions from the traders depend on the bid and ask prices that are set. In this case, the growing volumes of retail trade can be thanked for allowing brokers to reach this financial position wherein they pool their transactions to be able to trade at better prices. Today, retail spot forex spreads are within reach. In this market, quotes provide traders the values of currency pairs providing a price for buying and one for selling.
If you are trading in the forex market, you probably know how liquid it can get and trading can go non-stop for days. Traders can decide to join or get out of the market with ease. If you profit from this trading avenue then you should expect to pay a capital gains tax.
You might not be aware of it but foreign exchange prices are always on the move. When it comes to a market like this one, a predicted increase in a currency's value may mean the depreciation of its pair. The movement of currencies occur with changes of about one percent or so. You might be wondering what the big deal is if changes happen like this.
The answer, of course, is leverage. Even with relatively small movements not to mention a marginal capital amount, you can win big in this trade. This allows traders to have some form of control over the trade even if they are working with brokers.
