Forex Markets and Foreign Exchange Transactions

Forex markets are foreign exchange markets where currencies are bought and sold for profits. The capital markets of Forex are presented globally and transactions are non-stop in the Forex market. Whether its Sydney or Tokyo you would find aggressive Forex dealers and brokers which are looking into their computer screens and on the telephone for minor changes which might affect a currency trade.


A Forex trade is carried out for profits which can be gained by buying and selling currencies. Currencies are always bought and sold in pairs. Let us have a look at an example to clarify a Forex deal.


You trade in EUR/USD (euro vs US dollar). You purchase 10,000 euros and pay 9,600 USD - on January 1 when the EUR/USD rate is 0.9600. Then you sell these euros at the market rate of 1.1800 on August 1. Therefore, you 11,800 USD. Thereby making a Forex transaction profit of USD 2,200.


Since all currencies are bought and sold in pairs a trader has to decide the pair of currency which he would like to do in your currency transactions. In the example above EUR is the base currency and the USD is the quote or the counter currency. If a trader has bought euros then he would have based his decision on the fact that euros may appreciate in the future. Therefore by selling euros back into dollars he would get more dollars and thus making a profit.


If your guess is that the US market is going to appreciate then you would place a SELL trade on EUR/USD. Therefore you will sell euros. These US dollars may be sold at a later point to book a profit.


To operating in the financial and Forex market it is important to understand that there are many factors which can affect the Forex dealing. The business market conditions, the political scenario, threat of climatic disasters or threatening farm output increase. All these factors play an important role in the Forex market.


Forex traders are using a Forex trading platform. This is sophisticated software which offers a trader with real-time news and analysis on the currencies which they are dealing in. On this you can execute buy and sell orders as well as stop-order. Of course these are also linked to the Forex margin account. Thereby it gives you ample leeway to make transactions with a small investment. Forex trading is a competitive market where more credit worthy the institution or the trader the better their resource of information and quality of data is. So this can help them to make better deals in the currency transactions and make higher profit.