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Dynamic Watts Investment Club - About Foreign Exchange

How Does TheForeign Exchange Work?

The main participants in this market are the larger international banks.

Financial centers around the world function as anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the exception of weekends.

Since currencies are always traded in pairs, the foreign exchange market does not set a currency's absolute value, but rather determines its relative value by setting the market price of one currency if paid for with another. Ex: US$1 is worth X CAD, or CHF, or JPY, etc.

  • What is forex?

    The foreign exchange market (Forex, FX, or currency market) is a global decentralized market for the trading of currencies.

    This market determines foreign exchange rates for every currency. It includes all aspects of buying, selling, and exchanging currencies at current or determined prices. In terms of trading volume, it is by far the largest market in the world.

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  • THE BREAKDOWN
    OF FOREX

    The foreign exchange market works through financial institutions and operates on several levels.

    Behind the scenes, banks turn to a smaller number of financial firms known as "dealers" who are involved in large quantities of foreign exchange trading. Most foreign exchange dealers are banks, so this behind-the-scenes market is sometimes called the "interbank market" (although a few insurance companies and other kinds of financial firms are involved.) Trades between foreign exchange dealers can be very large, involving hundreds of millions of dollars. Because of the sovereignty issue when involving two currencies, currency trading (Forex) has little (if any) supervisory entity regulating its actions.

  • HOW FOREX FUNCTIONS

    The foreign exchange market assists international trade and investments by enabling currency conversation.

    For example, it permits a business in the United States to import goods from European Union member states, especially Eurozone members, and pay Euros even though its income is in United States dollars. It also supports direct speculation and evaluation relative to the value of currencies and the carry trade speculation, based on the differential interest rate between two currencies. More than $7 trillion are traded on average every day.

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