INTRODUCTION TO FOREIGN EXCHANGE MARKET
The term “Forex” or “Forex Market” is very widely used in the day to day life. It is an Over The Counter (OTC) or a global decentralized market. It is the most liquid market in the Financial System. The Forex Market has many distinctive aspects, some of which are listed below:
LARGEST MARKET IN THE WORLD
The Forex Market is by far the largest market in the world. The Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Markets have recorded a total of $ 6.6 trillion transactions per day as on April 2019. The trading volume of the Forex Market is far greater than any of the stock markets or bonds markets in the world. The Forex Market is also the oldest market of the world!
AROUND THE CLOCK MARKET
The Forex Market is the only market that works 24*7.i.e. the market is operational at all the times. Due to it being operational round the clock, it clashes with the stock and bond markets that are open only for a few hours a day. In case, if you want to buy or sell Forex there will always be someone somewhere on the planet that may be willing to sell or buy it. Hence the flexibility of the Forex Market is unmatchable.
MOST LIQUID MARKET
The certainty that the Forex Market is open 24*7 and also that it is the largest trading market makes it the most liquid market. The currency transactions can happen in a matter of seconds via a smart phone. Mostly these transactions are handled by the Central Banks and hence foul play is hardly possible. And since numerous transactions take place on a daily basis one can be sure that the market works efficiently.
FOREX TRADE
If you have ever traveled overseas, you have made a forex transaction. Take a trip to Europe and convert your INR into EUROS. The Forex Market has variety of options when it comes to trading. The contracts differ from various sizes to various different currencies. The amount of varying degree of leverage provided by the forex market is staggering. Also there are long and short side of trading contracts available in the forex market.
NO PHYSICAL EXISTENCE
The Forex Market does not have a physical existence. Like the Bond Markets and the Stock Markets have places/buildings you can visit i.e. BSE, NYSE, LSE, etc. The Forex Market does not operate in a particular building, it operates on the interconnected networks via electronic means. The Forex Market is made up of Money Changers all over the world. Therefore a currency dealer in your city can carry out transactions with someone located far away in Paris.