Before you start working on Forex, you need to understand the place of the private investor in a system of world currency exchange. The study participants Forex species and their impact on the market will allow to understand how a change in exchange rates in the world. Slightly simplified scheme of interaction between the participants Forex is listed below.
The central link in the international foreign exchange are the brokerage firms, also known as brokerage houses. They play the role of mediators between the other major players in Forex.
Commercial banks are the major participants in forex. They can perform transactions of purchase / sale of foreign currency, both on its own behalf and by order of their customers. Such transactions may be concluded either directly with other commercial banks, which failed to agree on quotations or through brokerage firms. A simplified scheme of interaction here next - dealer department of a commercial bank wanting to buy its currency interest binds to the brokerage firm, and asks what the deal offered by other commercial banks. If satisfied with the terms of the deal, commercial banks enter into the transaction through a brokerage firm, which in turn earns a commission (a percentage of the transaction). Thus, brokerage firms are the central point (!), Where a real exchange rate. Commercial banks also receive information about the current level of the exchange brokerage firms.
Another major player in the forex are the central banks of the world. These participants are entering the market, as a rule, not for profit, but for the purpose of adjusting the exchange rate, and, consequently, the economy of the country. Most central banks do not make deals directly and through one or more commercial banks by disguising their activities. The central banks of the developed countries of the world can unite to achieve a common goal.
All of the participants in the Forex are active participants, that is, they not only make operations on the currency market, but also offer their own prices (quotes). Active participants tend to make transactions in the millions of dollars and do not use margin trading (of which details will be explained later). Active participants also called Forex market makers (from the English phrase market makers). In addition to the active participants in the Forex operate as passive participants - that is, those who do not establish quotes, and can only make transactions at the Quote offered active participants.
Passive participants primarily include various investment funds. These companies, carrying out currency speculation, place their funds in securities of governments and corporations of different countries. One of the most famous investment funds is the fund «Quantum» George Soros. Available funds are billions of dollars, in fact, they can attract billions of dollars of borrowed money, so funds can withstand even the central bank intervention in the currency market.
Another type of passive participants in the Forex are the participants of foreign trade operations. It - companies exporting abroad or import from abroad. If the transaction is carried out on the import goods in foreign currency, such currency must purchase prior to the transaction. On the other hand, if the transaction is the export of goods in foreign currency, such currency to sell it after the transaction.Such operations are usually carried out exclusively through commercial banks.
Another passive participant can be noted multinational corporations - are companies that have branches abroad. When you move resources from overseas branches to the central office can not do without foreign exchange transactions conducted through commercial banks.
Gradually we come to the role of the private investor in the international Forex market. A private investor, as a rule, does not have capital sufficient to complete transactions through brokerage houses - the minimum size of such transaction in the Forex is 100 000 US dollars. Through commercial banks private investors can make transactions of purchase / sale of foreign currency, but to speculate on the course of commercial banks to private investors impossible - they vary, usually only once a day, and the difference between buying and selling rates (spread about him later) is very high to get some profit from the operation. That is why there were so-called Forex commission house (they can also be called retail brokerage houses),which target customers are just private investors. By using the principle of margin trading (it will be discussed in detail later), a private investor could, having a relatively small capital to make the deal through a commission house hundreds of times greater than the capital, but only at the risk of their capital (without risking other people's money).
With the development of the Internet brokerage houses evolved into dealing centers and are now able to provide their services to anyone interested in the wide world. Anyone possessing the sum of a few thousand dollars, can try to work on Forex. But do not hurry! Before you have forged an account and start to work in one of the dealing centers Internet site thoroughly study the forexanewway and work on a virtual account for several months. Virtual Account allows you to open almost all dealing centers on the Internet. You have nothing to lose and gain invaluable initial experience of Forex trading.
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