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What is forex trading wikipedia

Forex Trading: A Beginner’s Guide,Why Do People Trade Currencies?

WebLooking for What Is Forex Trading Wikipedia? eToro is a multi-asset and foreign exchange trading company that specializes in providing foreign exchange and financial WebForex trading is the act of buying and selling foreign currencies. Studying a currency pair or performing research are both of your responsibilities. On a trading platform, finding WebIn finance, a trading strategy is a fixed plan that is designed to achieve a profitable return by going long or short in markets. The main reasons that a properly researched trading ... read more

Sign Up. Facebook Twitter Pinterest LinkedIn Digg Tumblr Email Reddit Buffer Flipboard Telegram. Adblock Detected We have detected that you are using extensions to block ads. Please support us by disabling these Adblock Extensions or Software. Refresh Page. Send this to a friend. Send Cancel. This implies that there is not a single exchange rate but rather a number of different rates prices , depending on what bank or market maker is trading, and where it is.

In practice, the rates are quite close due to arbitrage. Due to London's dominance in the market, a particular currency's quoted price is usually the London market price. Major trading exchanges include Electronic Broking Services EBS and Thomson Reuters Dealing, while major banks also offer trading systems. A joint venture of the Chicago Mercantile Exchange and Reuters , called Fxmarketspace opened in and aspired but failed to the role of a central market clearing mechanism.

The main trading centers are London and New York City, though Tokyo , Hong Kong, and Singapore are all important centers as well. Banks throughout the world participate. Currency trading happens continuously throughout the day; as the Asian trading session ends, the European session begins, followed by the North American session and then back to the Asian session.

Fluctuations in exchange rates are usually caused by actual monetary flows as well as by expectations of changes in monetary flows. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time. However, large banks have an important advantage; they can see their customers' order flow.

Currencies are traded against one another in pairs. The first currency XXX is the base currency that is quoted relative to the second currency YYY , called the counter currency or quote currency. The market convention is to quote most exchange rates against the USD with the US dollar as the base currency e. USDJPY, USDCAD, USDCHF. The exceptions are the British pound GBP , Australian dollar AUD , the New Zealand dollar NZD and the euro EUR where the USD is the counter currency e.

GBPUSD, AUDUSD, NZDUSD, EURUSD. The factors affecting XXX will affect both XXXYYY and XXXZZZ. This causes a positive currency correlation between XXXYYY and XXXZZZ. On the spot market, according to the Triennial Survey, the most heavily traded bilateral currency pairs were:. The U. currency was involved in Trading in the euro has grown considerably since the currency's creation in January , and how long the foreign exchange market will remain dollar-centered is open to debate.

Until recently, trading the euro versus a non-European currency ZZZ would have usually involved two trades: EURUSD and USDZZZ. The exception to this is EURJPY, which is an established traded currency pair in the interbank spot market. In a fixed exchange rate regime, exchange rates are decided by the government, while a number of theories have been proposed to explain and predict the fluctuations in exchange rates in a floating exchange rate regime, including:.

None of the models developed so far succeed to explain exchange rates and volatility in the longer time frames. For shorter time frames less than a few days , algorithms can be devised to predict prices. It is understood from the above models that many macroeconomic factors affect the exchange rates and in the end currency prices are a result of dual forces of supply and demand. The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly.

No other market encompasses and distills as much of what is going on in the world at any given time as foreign exchange. Supply and demand for any given currency, and thus its value, are not influenced by any single element, but rather by several. These elements generally fall into three categories: economic factors, political conditions, and market psychology.

Economic factors include: a economic policy, disseminated by government agencies and central banks, b economic conditions, generally revealed through economic reports, and other economic indicators. Internal, regional, and international political conditions and events can have a profound effect on currency markets. All exchange rates are susceptible to political instability and anticipations about the new ruling party.

Political upheaval and instability can have a negative impact on a nation's economy. For example, destabilization of coalition governments in Pakistan and Thailand can negatively affect the value of their currencies. Similarly, in a country experiencing financial difficulties, the rise of a political faction that is perceived to be fiscally responsible can have the opposite effect.

Market psychology and trader perceptions influence the foreign exchange market in a variety of ways:. A spot transaction is a two-day delivery transaction except in the case of trades between the US dollar, Canadian dollar, Turkish lira, euro and Russian ruble, which settle the next business day , as opposed to the futures contracts , which are usually three months. Spot trading is one of the most common types of forex trading. Often, a forex broker will charge a small fee to the client to roll-over the expiring transaction into a new identical transaction for a continuation of the trade.

This roll-over fee is known as the "swap" fee. One way to deal with the foreign exchange risk is to engage in a forward transaction. In this transaction, money does not actually change hands until some agreed upon future date. A buyer and seller agree on an exchange rate for any date in the future, and the transaction occurs on that date, regardless of what the market rates are then. The duration of the trade can be one day, a few days, months or years. Usually the date is decided by both parties.

Then the forward contract is negotiated and agreed upon by both parties. Forex banks, ECNs, and prime brokers offer NDF contracts, which are derivatives that have no real deliver-ability. NDFs are popular for currencies with restrictions such as the Argentinian peso. In fact, a forex hedger can only hedge such risks with NDFs, as currencies such as the Argentinian peso cannot be traded on open markets like major currencies. The most common type of forward transaction is the foreign exchange swap.

In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date. These are not standardized contracts and are not traded through an exchange.

A deposit is often required in order to hold the position open until the transaction is completed. Futures are standardized forward contracts and are usually traded on an exchange created for this purpose. The average contract length is roughly 3 months. Futures contracts are usually inclusive of any interest amounts. Currency futures contracts are contracts specifying a standard volume of a particular currency to be exchanged on a specific settlement date.

Thus the currency futures contracts are similar to forward contracts in terms of their obligation, but differ from forward contracts in the way they are traded. In addition, Futures are daily settled removing credit risk that exist in Forwards. In addition they are traded by speculators who hope to capitalize on their expectations of exchange rate movements. A foreign exchange option commonly shortened to just FX option is a derivative where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date.

The FX options market is the deepest, largest and most liquid market for options of any kind in the world. Controversy about currency speculators and their effect on currency devaluations and national economies recurs regularly. Economists, such as Milton Friedman , have argued that speculators ultimately are a stabilizing influence on the market, and that stabilizing speculation performs the important function of providing a market for hedgers and transferring risk from those people who don't wish to bear it, to those who do.

Large hedge funds and other well capitalized "position traders" are the main professional speculators. According to some economists, individual traders could act as " noise traders " and have a more destabilizing role than larger and better informed actors. Currency speculation is considered a highly suspect activity in many countries.

He blamed the devaluation of the Malaysian ringgit in on George Soros and other speculators. Gregory Millman reports on an opposing view, comparing speculators to "vigilantes" who simply help "enforce" international agreements and anticipate the effects of basic economic "laws" in order to profit.

A relatively quick collapse might even be preferable to continued economic mishandling, followed by an eventual, larger, collapse. Mahathir Mohamad and other critics of speculation are viewed as trying to deflect the blame from themselves for having caused the unsustainable economic conditions. Risk aversion is a kind of trading behavior exhibited by the foreign exchange market when a potentially adverse event happens that may affect market conditions.

This behavior is caused when risk averse traders liquidate their positions in risky assets and shift the funds to less risky assets due to uncertainty. In the context of the foreign exchange market, traders liquidate their positions in various currencies to take up positions in safe-haven currencies, such as the US dollar. An example would be the financial crisis of The value of equities across the world fell while the US dollar strengthened see Fig.

This happened despite the strong focus of the crisis in the US. Currency carry trade refers to the act of borrowing one currency that has a low interest rate in order to purchase another with a higher interest rate. A large difference in rates can be highly profitable for the trader, especially if high leverage is used. However, with all levered investments this is a double edged sword, and large exchange rate price fluctuations can suddenly swing trades into huge losses.

From Wikipedia, the free encyclopedia. Global decentralized trading of international currencies. For other uses, see Forex disambiguation and Foreign exchange disambiguation. US Dollar Index DXY. See also: Forex scandal. Main article: Retail foreign exchange trading. Main article: Exchange rate. Derivatives Credit derivative Futures exchange Hybrid security.

Foreign exchange Currency Exchange rate. Forwards Options. Spot market Swaps. Main article: Foreign exchange spot. See also: Forward contract. See also: Non-deliverable forward. Main article: Foreign exchange swap. Main article: Currency future. Main article: Foreign exchange option. See also: Safe-haven currency. Main article: Carry trade. Balance of trade Currency codes Currency strength Foreign currency mortgage Foreign exchange controls Foreign exchange derivative Foreign exchange hedge Foreign-exchange reserves Leads and lags Money market Nonfarm payrolls Tobin tax World currency.

The percentages above are the percent of trades involving that currency regardless of whether it is bought or sold, e. World History Encyclopedia. Cottrell — Centres and Peripheries in Banking: The Historical Development of Financial Markets Ashgate Publishing, Ltd.

Cottrell p. Proceedings of the National Academy of Sciences, 68 10 — CIBC Mellon Qtrade Questrade RBC Direct Investing TD Securities Virtual Brokers Voleo Wealthsimple. Angel Broking Axis Direct Dhani Edelweiss Finvasia FundsIndia Geojit Financial HDFC securities ICICIdirect India Infoline Karvy Corporate Kotak Securities Kuvera.

in Motilal Oswal Scripbox Reliance Securities Religare Sharekhan. Ally Financial Charles Schwab Chase Bank Citibank E-Trade Fidelity Investments Firstrade Securities Interactive Brokers Lightspeed M1 Finance Matchbook FX Merrill Edge PNC Financial Robinhood SoFi TD Ameritrade TradeStation U. Bancorp The Vanguard Group Webull Wells Fargo.

Avanza BUX CMC Markets Degiro Doorstep FinecoBank Finam Holdings Freetrade HSBC InvestDirect IG Group Interactive Investor Nordnet OTP Bank Plus Saxo Bank Standard Chartered Swissquote Takarékbank Trade Republic. Alpari Group CommSec FXOpen Stake. Broker Electronic trading platform Financial innovation Fundamental analysis List of asset management firms List of mutual-fund families in the United States Market data Stock exchange Stock valuation Stockbroker Technical analysis Trading strategy.

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In finance , a trading strategy is a fixed plan that is designed to achieve a profitable return by going long or short in markets. The main reasons that a properly researched trading strategy helps are its verifiability, quantifiability, consistency, and objectivity. Bad money management can make a potentially profitable strategy unprofitable.

Trading strategies are based on fundamental or technical analysis , or both. They are usually verified by backtesting, where the process should follow the scientific method , and by forward testing a. The term trading strategy can in brief be used by any fixed plan of trading a financial instrument, but the general use of the term is within computer assisted trading, where a trading strategy is implemented as computer program for automated trading.

Technical strategies can be broadly divided into the mean-reversion and momentum groups. All these trading strategies are basically speculative. In the moral context speculative activities are considered negatively and to be avoided by each individual.

The development and application of a trading strategy preferably follows eight steps: [7] 1 Formulation, 2 Specification in computer-testable form, 3 Preliminary testing, 4 Optimization, 5 Evaluation of performance and robustness, [8] 6 Trading of the strategy, 7 Monitoring of trading performance, 8 Refinement and evolution. Usually the performance of a trading strategy is measured on the risk-adjusted basis. Probably the best-known risk-adjusted performance measure is the Sharpe ratio.

However, in practice one usually compares the expected return against the volatility of returns or the maximum drawdown. Normally, higher expected return implies higher volatility and drawdown. The choice of the risk-reward trade-off strongly depends on trader's risk preferences. Often the performance is measured against a benchmark, the most common one is an Exchange-traded fund on a stock index. In the long term a strategy that acts according to Kelly criterion beats any other strategy.

However, Kelly's approach was heavily criticized by Paul Samuelson. A trading strategy can be executed by a trader Discretionary Trading or automated Automated Trading. Discretionary Trading requires a great deal of skill and discipline. It is tempting for the trader to deviate from the strategy, which usually reduces its performance. An automated trading strategy wraps trading formulas into automated order and execution systems. Advanced computer modeling techniques, combined with electronic access to world market data and information, enable traders using a trading strategy to have a unique market vantage point.

A trading strategy can automate all or part of your investment portfolio. Computer trading models can be adjusted for either conservative or aggressive trading styles. From Wikipedia, the free encyclopedia. Plan for achieving returns from a financial marketplace.

Knowledge rather than Hope: A Book for Retail Investors and Mathematical Finance Students. International Review of Financial Analysis. doi : International Journal of Ethics. JSTOR S2CID The Evaluation and Optimization of Trading Strategies. The "fallacy" of maximizing the geometric mean in long sequences of investing or gambling. Proceedings of the National Academy of Sciences, 68 10 — CIBC Mellon Qtrade Questrade RBC Direct Investing TD Securities Virtual Brokers Voleo Wealthsimple.

Angel Broking Axis Direct Dhani Edelweiss Finvasia FundsIndia Geojit Financial HDFC securities ICICIdirect India Infoline Karvy Corporate Kotak Securities Kuvera. in Motilal Oswal Scripbox Reliance Securities Religare Sharekhan. Ally Financial Charles Schwab Chase Bank Citibank E-Trade Fidelity Investments Firstrade Securities Interactive Brokers Lightspeed M1 Finance Matchbook FX Merrill Edge PNC Financial Robinhood SoFi TD Ameritrade TradeStation U.

Bancorp The Vanguard Group Webull Wells Fargo. Avanza BUX CMC Markets Degiro Doorstep FinecoBank Finam Holdings Freetrade HSBC InvestDirect IG Group Interactive Investor Nordnet OTP Bank Plus Saxo Bank Standard Chartered Swissquote Takarékbank Trade Republic. Alpari Group CommSec FXOpen Stake. Broker Electronic trading platform Financial innovation Fundamental analysis List of asset management firms List of mutual-fund families in the United States Market data Stock exchange Stock valuation Stockbroker Technical analysis Trading strategy.

Category:Online brokerages. Categories : Financial markets. Hidden categories: Articles with short description Short description is different from Wikidata. Navigation menu Personal tools Not logged in Talk Contributions Create account Log in.

Namespaces Article Talk. Views Read Edit View history. Main page Contents Current events Random article About Wikipedia Contact us Donate. Help Learn to edit Community portal Recent changes Upload file. What links here Related changes Upload file Special pages Permanent link Page information Cite this page Wikidata item.

Download as PDF Printable version. Deutsch Español Tiếng Việt Edit links. Canada CIBC Mellon Qtrade Questrade RBC Direct Investing TD Securities Virtual Brokers Voleo Wealthsimple.

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WebIn finance, a trading strategy is a fixed plan that is designed to achieve a profitable return by going long or short in markets. The main reasons that a properly researched trading WebLooking for What Is Forex Trading Wikipedia? eToro is a multi-asset and foreign exchange trading company that specializes in providing foreign exchange and financial WebForex trading is the act of buying and selling foreign currencies. Studying a currency pair or performing research are both of your responsibilities. On a trading platform, finding ... read more

The main trading centers are London and New York City, though Tokyo , Hong Kong, and Singapore are all important centers as well. In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves. What links here Related changes Upload file Special pages Permanent link Page information Cite this page Wikidata item. Currencies are important because they allow us to purchase goods and services locally and across borders. Retail foreign exchange trading is a small segment of the larger foreign exchange market where individuals speculate on the exchange rate between different currencies. Main article: Foreign exchange fraud.

Israeli new shekel. Spot Exchange Rate: Definition, How They Work, and How to Trade A spot exchange rate is the rate for a foreign exchange transaction for immediate delivery, what is forex trading wikipedia. Archived PDF from the original on 27 October There are two distinct features of currencies as an asset class :. There are several online courses available for beginners that teach the ins and outs of forex trading.

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