Forex currency trading is an activity in the forex market that involves the exchange of currency. The currency trading is done for various reasons that solely depend on the parties involved in the transaction.
Who can participate in forex currency transactions?
Until recently, the forex market was left to large multinational corporations and government agencies and the small time traders never knew much about the trade. There was little information available on the internet to provide the general public of what really went on with the forex currency trading business. This is not the case anymore. Nowadays even the small time traders(retailers) have delved into the business thanks to the information age, more specifically the internet.
What constitutes a typical forex currency transaction?
Unlike the normal markets that we are all used to, the forex market operates in a rather unique manner. There are no physical exchanges of goods or cash, the trading is done online. It just takes the participant to make an entry in their computer to effect a transaction. The other party also does the same. One party exchanges a currency for the other party’s currency. This might make you wonder what the main aim of the trading is all about. The reason behind the success of the trading and the core reason for the forex currency trading is to facilitate international trade between countries and corporations in the respective countries.
The uniqueness of the forex currency trading business
The forex currency trading market, unlike other markets, operates very differently on more aspects than one. First, it is not controlled by any central body, like is the case with the stock markets in any country which are controlled by a particular stock exchange body. The market is purely self-controlled, it depends on forces of demand and supply making the market very liquid and volatile as well. The perfect competition in the market brings about all the fascination that is associated with the market.
Secondly, the fact that there are no brokers in the market makes this market even more attractive. Every participant in the market is a dealer and a principal on their own. The participants are not only involved in the transactions but they all bear some of the market risk involved in the whole process. Therefore, the agents and the commissions are not part of the market and so no third party transactions, only direct trading. The parties are able to reap the full benefits (profit) that is accrued from the transaction.