Banks, financial institutions, and corporations no longer have a monopoly on foreign currency trading thanks to digital advances. Now, individual investors can access the foreign exchange market (Forex) too. There are 180 legal currencies that can be traded on Forex, but 95% of currency trade relates to these most popular currencies.
By using information technology platforms between global banks to conduct foreign currency trading, the foreign exchange market (FX or forex) is a decentralized global market where all the world’s currency trading is conducted over a variety of platforms and exchanges.
The advent of internet trading software has propelled the industry to allow instantly tradeable currency which has caused the number of daily transaction volumes to increase dramatically. This has led the Forex market to be extremely liquid and more stable.
As the largest trade market in the world, trading on the foreign exchange market occurs the European, Asian and United States trading sessions. While overlap does occur between the three sessions, the majority of each currency that is traded occurs during their session.
An exchange rate is based on the value of a country’s currency in relation to another country’s currency. With currency rates determined by how much demand there is against the supply of a currency, the increase or decrease of a country’s currency can fluctuate based on interest rates, unemployment numbers, inflation, gross domestic product output, manufacturing date, and commodities.
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