Forex market- Its Distinctive Features

[Vincent Stevens]

Forex market is a vast market for trading foreign exchange or currencies of different countries. The market has many distinctive features. There are three main features which a newbie to the trade has to know. These three features greatly influence the strategy formations in the trade. The forex market encompasses the whole world in its stride. Hence, successfully trading in the forex market by interpreting the various situations, is little difficult. That is why the forex brokers like OctaFx broker stress on proper understanding of the distinctive features of the forex market before opening the forex trading account. The features are as follows:

 

Functional feature:

The forex market functions to enable the transfer of purchasing power between several countries. While making trades, different countries convert their profits into currency funds, for their domestic use. The purchasing power of one country can be strong while that of another country shall be low. Another function of forex market is to avoid the crashing of the exchange rates and to provide credit that enhances the international trades. OctaFx broker strongly opines that in international trading, the forex market efficiently provides for the movement of goods between different nations and also mobilises funds for financing the trade.

 

Geographical feature:

The forex market has no limits. It is spread throughout the world. No nation is left untouched by its impact. The forex market operates for 24 hours a day. This is the best part of forex trading. Anyone can trade at any time. The market surely responds. Every individual can earn from forex trade. According to OctaFx broker, the geographical feature of the forex market enables the amateurs and other experienced traders to understand the extent and volume of the trade. The major forex trading exchanges are situated in Hong Kong, Sydney, Singapore, Tokyo, London, New York, Bahrain and San Francisco.

 

Participants:

The forex trade thrives between wholesale market and the clients. They are collectively called as retail market. Different kinds of participants are involved in the trade between the parties of the retail market. They are:

 

·        Banks:  The main participants of the forex market are the banks and the non-banking institutions that act as foreign exchange dealers. They excel by buying the currencies at bid rates and sell them at asking rates. This way they earn huge profits.

 

·        Investment firms: It is often seen that investment firms like exporters, importers, tourists and other investors make use of the forex market to make investments. OctaFx broker feels that the investment firms usually do this to use forex as a hedge to reduce the risk.

 

·        Speculators: This is the third group that strives to make profit from the forex market. They act for their own benefit. They try lucrative rates to earn profits, with least risk. Sometimes, even the bankers join this group.

 

·        Brokers: Brokers such as OctaFx broker are the last participants in the forex trade. They do not participate as partners but act as facilitators of trade. They charge nominal fee for their services.

Conclusion: Thus, understanding the features of the forex market is very important before commencing the trade.