The Foreign Exchange Market Operates 24 Hours Per Day

Category: Finance, Currency Trading.

We come face to face with our local money every day. To jump this hurdle, we go to the bank to handle the currency exchange, or to a number of foreign currency exchange companies we can find on the internet, who will invariably quote far better rates of exchange.

The time will come when some of us will need to make or receive a payment in a foreign currency. Believe me they will, they could not exist if they did not offer a better deal. But you do need to know these fundamental words to be able to understand what they refer to when becoming a car driver otherwise life would be hard. You do not have to be a mechanic to know some essential words about a car like the steering wheel, clutch pedal, the hand brake, the engine etc. Similarly, it is important to know a little about the foreign exchange market so that when the day comes and you will be need to buy foreign currency to get that house of your dreams or anything else abroad, you are not at a disadvantage. Unlike the London Stock Exchange or the New York Stock Exchange centres, it has no fixed abode, but manages very well and is extremely active.

The FOREIGN EXCHANGE MARKET also called FOREX or FX, has no trading centre. There are hundreds of brokerage companies and banks, who deal between themselves including big corporations. On another level, there are smaller agents who handle the buying and selling of the foreign currencies, going by the rates as signalled by Reuters or other agencies. Put these on one level. These rates are aligned to the actual events taking place non stop in the market. . When the media talk about the foreign exchange market, it is the wholesale level they refer to.

The difference between these two levels is a wholesale and retail classification as existing in other trades. Foreign exchange currency institutions have better access to obtaining a more advantageous rate of exchange than the ordinary small company or the man in the street. BID is the rate at which a dealer is ready to purchase the base currency. The foreign exchange market operates 24 hours per day. OFFER is the rate at which the dealer is ready to sell the basic currency. The MARKET MAKERS make the profit from the spread.

The difference between the BID and ASK price is called the SPREAD. They make no commission. BULL MARKET refers to a price rising market. BASIC CURRENCY is the currency against which the other currencies are quoted. BEAR MARKET refers to a declining price market. CABLE: When the steel cable was connected under the Atlantic in 1850 thus linking USA with UK enabling telegraph transmission between the London and New York Exchanges, it was called ATLANTIC CABLE.

BOTTOM: a description of a price decline meeting heavy support against further price decline. Satellite and optic cables are now used, and the word CABLE refers to GBP/ USD currency pair rate. MARGIN refers to a deposit in cash required to cover the possibility of loss the client may encounter trading the foreign exchange. CROSS RATES: This refers to currency pairs where the USD is not included like GBP/ EUR or GBP/ JPY. MARGIN CALL refers to a requirement for additional money, to make up the minimum cash deposit needed to cover any losses the client may encounter trading in the foreign exchange market. There are of course, many more terms used in the foreign currency business, but you have here a selection which will help you to know some of the basics.

VOLATILITY refers to the extent of price fluctuation. Good luck.

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