Foreign Exchange Market

The foreign exchange market is one of the various financial markets available among equity, debt, derivative, and commodity markets, the foreign exchange or FX market deals with currency trading and investing, where currencies are bought and sold in exchange for each other, benefiting from the currency fluctuations a trader or investor can make a profit but can also suffer a loss, so adequate and essential FX market insights and trading techniques must be acquired first in order for an investor or trader to be successful and profitable.

If you think analyzing a company’s financials in order to value it’s stock price is hard, what about analyzing a whole country, as a stock is a reflection of a company’s financial and economic position, a currency can be seen as a stock in the economy of the country, thus analyzing the economic releases and announcement is very vital for fundamental investors relying on economic news analysis and the major economic trends of the country’s currency. Another type of investors or traders cater to Technical Analysis which is the prediction of the future price movements based on the analysis of the historic price movements and significant price levels that have been visited by the currency in the past.

Currencies are traded in pairs, because every currency derives it’s value from how much it worth in another currency, for example a quote of EUR/USD : 1.3245 means that 1 Euro equals 1.3245 US Dollars where the first mentioned currency is the base currency (EUR) and the second mentioned currency is the quote currency (USD).

The main players in the FX market are Central Banks trying to maintain their foreign currency reserves, Investment Banks providing liquidity to their clients and sometimes trading for their own benefit, Commercial Companies dealing in international trade and import & export activities, Investors & Speculators trying to benefit from the change of currency price in order to make profit, and retail traders trading currencies for travel, tourism, work, or even investment purposes.

The FX market is the largest market on the planet counting for about 5 Trillion Dollars in daily trading volume, there is no such a big market as the FX market and the profit potential is limitless and so is the loss potential as well, it’s a very risky market so one needs to be highly trained and skilled in order to take a place among the winning and profitable niche in this market.

By Ahmed Refaie, CEO, G.P.I. Global Partners Investments Limited, and Author at The Market Mogul