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Forex capital markets and Foreign exchange transactions
By Gary Berg
Forex Capital Markets are foreign exchange
markets where the currencies are been
bought and sold continuously for profits.
The capital markets of forex are present
globally and transactions are non-stop in
this forex cash market. Whether its Sydney
or Tokyo, one would find aggressive forex
dealers and brokers peering into their
computer screens and on the telephone for
minor changes that might affect this
currency trade.
The forex trade is carried out for profits
that can be gained by buying and selling
of the currencies. Currencies are always
bought and sold in pairs. Let us take an
example to clarify the forex deal
A trader trades in Euros/ Us Dollars.
(All figures are samples only) He
purchases 10,000 Euros on Jan 1 when the
EUR/USD rate is .9600. Then he sells these
Euros at the market rate of 1.1800. On
August 1. Therefore he gets 11,800 USD.
Thereby making a cool forex transaction
profit of USD 2200.
Since all currencies are bought and sold
in pairs, one needs to decide the pair of
currency that you would like to do your
currency transactions in. In this example
EUR is the base currency and the USD is
called the quote or the counter currency.
If you have bought Euros (simultaneously
selling dollars), then you have based your
decision on the fact that Euros may
appreciate in the future. Therefore by
selling Euros back into dollars you would
be getting more dollars and thus making a
profit.
If your assumption is that the US market
is going to appreciate, then you would
placing a SELL Euro/USD. Therefore you
will sell Euros while (simultaneously
buying USD). This USD may be sold at a
later stage to book a profit.
Operating in the financial and forex
trade, its important to understand that
there are many factors, which affect the
forex dealing. The business market
conditions, the political scenario, threat
of climatic disasters or impending farm
output increase. All these factors play a
crucial role in the forex markets.
Forex dealers trade on forex trading
platform or a session. These are
sophisticated software's, which provide
the forex dealers with real time news and
analysis on the currencies that they are
dealing in. On this they execute buy and
sell orders and well as stop order. Of
course these are also linked to the forex
margin account. Thus it gives the forex
dealers ample leeway to make transactions
with a small investment. The forex trade
is competitive market where more credit
worthy that the institution or the dealer,
the better their source of information and
quality of data is. Therefore this helps
them to make better deals in the currency
transactions and make better profits.
About the Author
Learn about Currency Trading. Market Leader Explains Process. For more in depth info visit:
http://www.forex-made-easy.biz/forex-capital-markets
Article Source: http://www.simplysearch4it.com/article/10014.html
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