The Foreign Exchange Market or "Forex" is where currencies are bought and sold. Since currencies are an integral part of modern day trade on a global scale, they need to be exchanged so that foreign business transactions can take place.
For instance, a US company who wants to purchase mangoes from the Philippines has to use Philippine Pesos (PHP) in order to pay for that commodity. This means that the importer will have to exchange his local currency with an equal value of the exporter's currency.
A tourist from another country will need to have the currency of the country that he is visiting in order to make trade while on tour. This means that he will need to exchange his local currency into EUR based on the current exchange rate.
Such examples are some of the reasons that makes the Forex market the biggest financial market with the highest liquidity. Not even the stock market can beat it. The absence of a central market place makes it all the more advantageous, as everything is done electronically over the counter, making it a highly global exchange.
It is open 24 hours daily at 5.5 days weekly, and the main financial centers of the world from London, New York, Tokyo, Frankfurt, Zurich, Singapore, Sydney, Paris, Hong Kong - are where these currencies traded across roughly all time zones. The moment trading ends in the West, it takes place in the East.
The Spot Market
The Spot Market, the Forwards Market, and the Futures Market are the three means of trade in Forex. Currently, the latter two rely on the Spot Market. The Spot Market has become the biggest and the fastest because of electronic trade.
It is where the currencies are purchased and sold based on the existing price, which in turn is settled by supply and demand. A "spot deal" is when a deal is confirmed, wherein one party releases an consented currency amount to the counter party and gets a precise amount of a different currency at the consented exchange rate value.
For instance, a US company who wants to purchase mangoes from the Philippines has to use Philippine Pesos (PHP) in order to pay for that commodity. This means that the importer will have to exchange his local currency with an equal value of the exporter's currency.
A tourist from another country will need to have the currency of the country that he is visiting in order to make trade while on tour. This means that he will need to exchange his local currency into EUR based on the current exchange rate.
Such examples are some of the reasons that makes the Forex market the biggest financial market with the highest liquidity. Not even the stock market can beat it. The absence of a central market place makes it all the more advantageous, as everything is done electronically over the counter, making it a highly global exchange.
It is open 24 hours daily at 5.5 days weekly, and the main financial centers of the world from London, New York, Tokyo, Frankfurt, Zurich, Singapore, Sydney, Paris, Hong Kong - are where these currencies traded across roughly all time zones. The moment trading ends in the West, it takes place in the East.
The Spot Market
The Spot Market, the Forwards Market, and the Futures Market are the three means of trade in Forex. Currently, the latter two rely on the Spot Market. The Spot Market has become the biggest and the fastest because of electronic trade.
It is where the currencies are purchased and sold based on the existing price, which in turn is settled by supply and demand. A "spot deal" is when a deal is confirmed, wherein one party releases an consented currency amount to the counter party and gets a precise amount of a different currency at the consented exchange rate value.
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