The international currency market was founded in 1971. The main principle of currency exchange on it is to exchange currency for some other. This market is the largest in the world. Its volume is about a trillion dollars a day. Corporations, commercial and state banks, brokers and other financial organizations are involved in this market.
The financial market Forex is an unusual market. It does not have a single center; trade is carried out by means of telephone communications, as well as through computer network terminals distributed throughout the world.
We can distinguish a set of main factors influencing the prices of currencies, among them the balancing of payments made mutually, the state of the economy, forecasts made on the basis of the analysis of the charts, as well as psychological and political factors.
If you have come across the mechanism by which the international currency market works, then you know that it is slightly different from the models described in the classic textbooks on macroeconomics. Typically, books write that foreign exchange demand and supply form an equilibrium rate. In reality, all financial markets are in a state of imbalance, everyone is in a state of constant search for equilibrium, which began around 1971. This was due to the fact that all financial authorities refused fixed rates, and currencies switched to free float. Due to the fact that the state has moved away from the policy of exchange rates, many professional players have arrived on the financial market, which has led to increased fluctuations in rates. The fact that the international currency market is subject to significant fluctuations causes mixed reactions among people. Professional traders consider it as a source of income, and financial managers of investment funds or corporations consider it as a source of risk and uncertainty about future income.
The international currency market: what are the attractiveness for investors?
- Liquidity. Operating with large money supply makes Forex quite liquid. For one transaction, the cost is many times higher than similar indicators for any other market. This feature is the most attractive for any investor, because it provides perfect freedom in matters of opening or closing positions.
- Availability. The ability to conduct round-the-clock trading is incredibly attractive. A market participant does not need to wait, which allows him to respond on time to every adverse event.
- A flexible system for the formation of tenders. Many investment managers, when they open a certain position, plan their future activity in advance in time. The international currency market makes it possible to open a position for a predetermined period at the moment when the investor needs it.
- The quality of transactions. Since the market is very mobile, almost every transaction is carried out at a price inherent only to it. This way you can avoid the problem of the so-called “escaping funds”, which is available on the currency exchange, as well as other exchange issues, when the number of funds is limited for simultaneous purchase or sale at a fixed cost.
- Market orientation. The movement of currencies has a definite and identifiable orientation, which can be traced over a sufficiently long time period. For each specific currency, there is a development pattern that is unique to it, and this allows investment managers to get ample opportunities for manipulation in the financial market.
Forex company allows speculators to earn income. Only because of this, many commercial banks remain afloat.