Forex Trading as a Perfect Competition on Global Market

December 24, 2011 by  
Filed under Forex Trading

Foreign exchange market or currency market is a financial market for trading currencies, the market has global scope and decentralized to smaller market which usually decentralized by countries. The anchors for the decentralized market is the financial centers around the globe, it plays the function of connecting various kind of sellers and buyers in wide range of areas during the working days and hours. The currency market also plays its function assisting international trade and also investment. This function is managed by providing conversion on the currencies used for international trading and international investment. The conversion allows international trades conducted in various currencies, the buyer can buy from the seller in the buyer’s currency and vice versa. The market also plays important part in the speculation of currency values and also the carry trade, it is the changes of interest rates between two currencies which also the subject of speculation in the foreign exchange market.

The transactions in the foreign exchange market is engaged by the purchase of a quantity of currency by a buyer and the buyer pay the seller in another currency in equal value based on the condition of the market prices. The foreign exchange market is a unique market because of its geographical dispersion and also the 24 hours transactions except on the weekends. The trading will be started at 20:15 GMT on Sunday and the market will be closed on Friday at 22:00 GMT. The market has various aspects and factors that affect the exchange rates, it creates a dynamic market that can fluctuate second by second based on the affecting factors and aspects. This can leads to speculations which even make the market more and more dynamic. Forex Trading also represent the largest asset class in the global transactions of liquidity. The currency market also mentioned as the ideal example of perfect market competition although there might be interventions on the market and the trading by central banks whenever there is currency intervention policy made by a country that owns a currency.