1.WHAT IS FOREX MARKET ?
2.TYPES OF FOREX MARKETS
3.MARKET SIZE AND LIQUIDITY
4.ADVANTAGES AND DISADVANTAGES OF FOREX MARKET
Today, let's talk about the Forex market, a large and active marketplace. Unlike traditional organizations, it isn't centralized, and it operates 24 hours a day, five days a week. We'll explore how it functions, the pros and cons for beginners, and get a better understanding of the Forex market!
THE FOREIGN EXCHANGE MARKET OR FOREX MARKET , is the most liquid financial market in the world .It is considered to be the largest decentralized marketplace where currencies are bought and sold . It is the global financial market that allows users like individuals or banks ,to buy or sell or exchange currencies .
The Forex market operates 24 hours a day, starting on Sunday at 10 p.m. GMT and closing on Friday at 10 p.m. GMT. People from banks, companies, central banks, brokers, and investors around the world trade currencies during this time to meet their financial needs and make profits.
Forex market is made up of two tiers. The first tier is Interbank market where large commercial banks exchange currencies with each other.The trade volume remains enormous even with less number of people being involved in the trading process. As a result it can dictate the currency values in the market. The interbank market involves processes like hedging, adjusting balance sheets, and handling transactions on behalf of clients.
And the second tier is over-the-counter market (OTC). In this second tier forex market, direct trading occurs between individuals and companies.It has gained popularity with the increase in the usage of online trading platforms. It has The largest geographic OTC trading centre is located in London, United Kingdom .According, to the total global forex trading in 2019 London dominates the market, accounting for approximately 43%.
The most traded currency in the forex market is USD. About 88% of daily volume is traded through US dollars.
Let us take a look at different types of foreign exchange markets with regard to the trade rate.
THE SPOT MARKET :
In the spot market, transactions involving currency pairs occur with an immediate exchange of currency between buyers and sellers, they require instant payment. The exchange rate used for this immediate transaction is known as the spot rate. The key participants in the spot market include commercial banks, investment banks, and central banks, as well as dealers, brokers, and speculators.