Forex is a market maker for instruments traded on the over-the-counter foreign exchange (forex) markets. Through Marketiva, you can buy or sell instruments like EUR/USD, GBP/JPY and others. Marketiva also provides services like discussion channels, latest forex news, trading signals and alerts, charting services and many more.
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Forex MarketThe Foreign Exchange market, also referred to as the "Forex" or "FX" market, is the largest financial market in the world, with a daily average turnover of approximately US$1.5 trillion. In comparison, the daily volume of the New York Stock Exchange is approximately US$30 billion per day.Until now, professional traders from major international commercial and investment banks have dominated the FX market. Other market participants range from large multinational corporations, global money managers, registered dealers, international money brokers, and futures and options traders, to private speculators.There are three main reasons to participate in the FX market. One is to facilitate an actual transaction, whereby international corporations convert profits made in foreign currencies into their domestic currency. Corporate treasurers and money managers also enter the FX market in order to hedge against unwanted exposure to future price movements in the currency market. The third and more popular reason is speculation for profit. In fact, today it is estimated that less than 5% of all trading on the FX market is actually facilitating a true commercial transaction.How It WorksForeign Exchange is the simultaneous buying of one currency and selling of another. The world's currencies are on a floating exchange rate and are always traded in pairs, for example Euro/Dollar or Dollar/Yen. In trading parlance, a long position is one in which a trader buys a currency at one price and aims to sell it later at a higher price. A short position is one in which the trader sells a currency in anticipation that it will depreciate. In every open position, an investor is long in one currency and shorts the other. FX traders express a position in terms of the first currency in the pair. For example, someone who has bought dollars and sold yen (USD/JPY) at 104.37 is considered to be long US Dollars and short Yen.The most often traded or 'liquid' currencies are those of countries with stable governments, respected central banks, and low inflation. Today, over 85% of all daily transactions involve trading of the major currencies, including the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.The FX market is considered an Over The Counter (OTC) or 'Interbank' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange, as with the stock and futures markets. A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.Factors Affecting the MarketCurrency prices are affected by a variety of economic and political conditions, most importantly interest rates, inflation and political stability. Moreover, governments sometimes participate in the Forex market to influence the value of their currencies, either by flooding the market with their domestic currency in an attempt to lower the price, or conversely buying in order to raise the price. This is known as Central Bank intervention. Any of these factors, as well as large market orders, can cause high volatility in currency prices. However, the size and volume of the Forex market makes it impossible for any one entity to "drive" the market for any length of time.Fundamental vs. Technical AnalysisCurrency traders make decisions using both technical factors and economic fundamentals. Technical traders use charts, trend lines, support and resistance levels, and numerous patterns and mathematical analyses to identify trading opportunities, whereas fundamentalists predict price movements by interpreting a wide variety of economic information, including news, government-issued indicators and reports, and even rumor.The most dramatic price movements however, occur when unexpected events happen. The event can range from a Central Bank raising domestic interest rates to the outcome of a political election or even an act of war. Nonetheless, more often it is the expectations surrounding an event that drives the market rather than the event itself.Buying and SellingIn the forex market, currencies are always priced and traded in pairs. You simultaneously buy one currency and sell another, but you can determine which pair of currencies you wish to trade. For example, if you believe the value of the euro is going to increase vis-á-vis the U.S. Dollar, then you would go long on EUR/USD instrument (currency pair). Obviously, the objective of forex currency trading is to exchange one currency for another in the expectation that the market rate or price will change so that the currency you bought has increased its value relative to the one you sold. If you have bought a currency and the price appreciates in value, then you must sell the currency back in order to lock in the profit. An open trade or position is one in which a trader has either bought / sold one currency pair and has not sold / bought back the equivalent amount to effectively close the position.Market ConventionsMarket conventions are rules and standards imposed by a governing body. In case of decentralized forex market these conventions might differ due to many national regulators (FSA, FSC, CFTC, NFA, BCSC, etc.). Since there is no central governing body that sets forex market rules and standards, we will reference only these that are universal.Quoting ConventionsThe first currency in the pair is referred to as the base currency, and the second currency is the counter or quote currency. The U.S Dollar is usually the base currency for quotes, and includes USD/JPY, USD/CHF, and USD/CAD. The exceptions are the Euro (EUR), Great Britain Pound (GBP), and Australian Dollar (AUD). As with all financial products, forex quotes include a "bid" and "ask", which is more often called "offer" in the forex market. The bid is the price at which a forex market maker is willing to buy (and you can sell) the base currency in exchange for the counter currency. The offer is the price at which a forex market maker will sell (and you can buy) the base currency in exchange for the counter currency. The difference between the bid and the offer price is referred to as the spread.
