The abbreviation Forex(Foreign Exchange), has established itself universally to denote trade in currencies, and is often abbreviated further to FX. In contrast to equities which are traded in a stock market, there is no fixed location for Forex. Instead, the market participants trade directly via electronic platforms.
The currency market involves an average daily volume of four trillion dollars, making it the world's largest financial market and putting equity trading well into the shade. Apart from banks, the major players in the currency markets are large industrial concerns, private currency traders, currency brokers and trading houses. A further key group of players are the central banks.
In forex trading, profit and loss are determined by favorable and unfavorable exchange rates. Trading in forex aims to exploit these currency differences in order to generate returns. Since the trade of currencies is electronic, currencies are sold digitally rather than any physical transactions taking place. These transactions operate in the form of currency pairs. The simultaneous purchase and sale of the currency pairs at the exchange rate in force at a given moment generates a profit or the loss for the client.
Currency trading is not restricted to banks, professional dealers or financial wizards. Anyone who is interested and sets about getting informed can deal with small deposits. In this respect it is different to the equities market, with it being possible to generate a profit or loss even with a low starting capital.
The successful trader utilizes extensive knowledge of the market environment to develop and then apply a strategy,and places available funds with discipline and quick thinking. Exchange rates are determined by a variety of economic, political,social and statistical factors.
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