Have you ever wanted to try out an unconventional method of making money? Whether this method would end up being an extra income or something you do for a living, there’s no harm in making extra cash.
Forex is an interbank market founded in 1971, back when floating exchange rates were first introduced. It is a market in which the currency of one country is traded for another at a price called exchange rate. A senior financial analyst at Wilkins Finance confirms that Forex is a group consisting of approximately 5000 institutions dealing with foreign currency trading which includes international banks, central banks, financial institutions and individuals. Through Forex, import and export payments are made, as well as purchase and sale of property in foreign countries. Due to the great financial demands in the past, smaller speculators could not take part in the market. Today, small traders are also allowed to invest, because the minimum investment amount of a transaction has been reduced to $100 000 or less. Also, when trading, besides the deposit, a small starting investment is required.
Banks play a triple role on Forex
They facilitate transactions between two parties, for example, companies that want to trade currencies to pay for goods or services. They speculate by buying and selling currencies. Banks take up positions in currencies with the speculation that later on the currencies will be worth more or less. International banks owe over 70% of income to this speculator business.
Central banks of various countries take part in Forex to serve in the interest of their countries. When a central bank buys or sells foreign currencies, it wants to affect the exchange rate of the domestic currency. Forex is so large that even the biggest central banks cannot control it but uses their power to have a significant influence on the fluctuation of currencies.
The term ‘market is kind of bent in this case because there is no specific place where transactions are made. The trade is mostly done by phone or, more often, through computer terminals which can be found in thousands of places in the world. Most of the transactions take place among banks that carry out transactions for the government companies or themselves. They publish prices, bid for purchase and ask for selling of currencies. The latest price from some of these batiks is considered to represent the current, latest market price for that currency.
There are numerous advantages for those who want to trade on this market:
With Forex, you need a buyer and a seller. A position can always be closed in the course of 24 hours. There is no danger here, like in the case of other assets, for the buyer to find himself in trouble because of a lack of interest from other buyers to purchase his assets.
Forex is open 24 hours a day, 6 days a week, because of different time zones from Sydney to New York. A trader can respond to new information as soon as it turns up instead of waiting for the next working day. In all time zones, there are traders willing to buy or sell a currency.
Exchange rates are listed in pairs. Every position includes buying or selling one currency and selling or buying another. Depending on the plan of trading, the trader has to decide what to do first, depending on whether he thinks the base currency will rise or fall in comparison to the term currency. Money can be made both on the rise and the fall of the exchange rate, but that’s why there are always losers and winners when it comes to trading.
Forex is extremely liquid and most transactions will be carried out according to the latest market price, but due to fast changes in exchange rates, sometimes there are ‘slips’ that the trade wasn’t carried out according to the wanted price because it had already changed. A confirmation about an executed trade can be seen instantly on your computer screen. Protecting the safety or traders’ accounts is of crucial importance to Internet brokers. It’s also very easy to make withdrawals from your account.