Forex market is a kind of trading market in its unique style of trading currencies of different nations. Currencies are traded worldwide among the major financial centers of cities like London, New York, Tokyo, Hong Kong, Paris, Sydney, Singapore, Zurich and Frankfurt. Forex market is the most liquid market in the whole world. All currencies of the world exist in forex market. The forex market is the largest market of the world whether in terms of total cash value traded. All persons, firms and countries are allowed to participate in forex market. The average traded values per day cross dollars in trillion. Obviously, the dollar of the USA is the most traded currency owing to values attached to it; Euro is also very popular and in fact, next to US dollar in forex market in popularity and transactions. Japanese Yen, British Pound, and Swiss Franc are some of the other most popular traded currencies in that order.
Two types
There are two types of Forex transactions such as spot or forward basis transactions. The transactions of the forex market are open for twenty four hours on all working days. There are differences in the nature and application of both the transactions. Spot transactions or deals are meant for immediate delivery, which is defined as two business days for pairs of the most of the traded currencies. Pair of currency relates to exchange from the currency in hand with currency desired. The immediate delivery is normally within two working days. The business or working days exclude all holidays such as Saturdays and Sundays, legal holidays and festival days like Easter and Christmas. During festive season, spot trading takes as many days as six to settle exchange of funds as on the settlement date. However, only one working day is required for either purchase or sale of pair currencies of USA Dollars and Canadian Dollars. Speculations are widely used in market mix, more so in combinations, especially during the short term. Moves in forex market are also driven by economic rates and differentials in interest rates. Forward deals are those which are settled by one day later than on the spot transaction. The price calculated for forward by adjusting the spot rate with the differences in the interest rates for the date between pair of currencies. The adjustment amount is given the name of forward points which only reflect interest rate differentials and not meant for forecasting.