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What is Forex
Posted by RAJESH KUMAR
on
2:36 AM
Foreign exchange market or forex is the market for buying and selling currencies. Currencies from all over the word can be traded in Forex which is an OTC (over the counter) market. The Forex market is loosely regulated by the Commodity Futures Trading Commission (CFTC). The National Futures Association (NFA) has regulatory authority over retail brokers and market makers. Forex, the most liquid market in the world operates round the clock.
Cross Rate: In the forex market currencies are always quoted in pairs. For example .709471 EUR/USD means that 1$=.709471 EURO. When USD is not one of the currencies whose exchange rate is being determined, the exchange rate is referred to as the cross rate.
pip:The smallest price movement in a currency is called a pip (percentage in point). Profits are measured in terms of pips. For the EUR/USD pair, 1 pip=.0001. Hence if EUR/USD increases by 1% it would mean an increase of 100pips.
Bid-Ask Spread:The difference between the bid (trader's sale price or the dealer's cost price) and the ask (trader's cost price or the dealer's sale price) is called the spread. The bid and ask are quoted in pairs. For example .709474-71 EUR/USD would mean that .709474 is the bid price and .709471 is the ask price. Market makers quote both bid and ask prices and profit from the bid ask spread.
Spot and Forward Rate:Spot rate is the price of a currency in the spot market. Forward rate is the predetermined rate at which a currency can be exchanged for another in the forward market
Cross Rate: In the forex market currencies are always quoted in pairs. For example .709471 EUR/USD means that 1$=.709471 EURO. When USD is not one of the currencies whose exchange rate is being determined, the exchange rate is referred to as the cross rate.
pip:The smallest price movement in a currency is called a pip (percentage in point). Profits are measured in terms of pips. For the EUR/USD pair, 1 pip=.0001. Hence if EUR/USD increases by 1% it would mean an increase of 100pips.
Bid-Ask Spread:The difference between the bid (trader's sale price or the dealer's cost price) and the ask (trader's cost price or the dealer's sale price) is called the spread. The bid and ask are quoted in pairs. For example .709474-71 EUR/USD would mean that .709474 is the bid price and .709471 is the ask price. Market makers quote both bid and ask prices and profit from the bid ask spread.
Spot and Forward Rate:Spot rate is the price of a currency in the spot market. Forward rate is the predetermined rate at which a currency can be exchanged for another in the forward market
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