What Is Forex?
The foreign exchange market is the "place" where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business. If you are living in the U.S. and want to buy cheese from France, either you or the company that you buy the cheese from has to pay the French for the cheese in euros (EUR). This means that the U.S. importer would have to exchange the equivalent value of U.S. dollars (USD) into euros. The same goes for traveling. A French tourist in Egypt can't pay in euros to see the pyramids because it's not the locally accepted currency. As such, the tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate.
The need to exchange currencies is the primary reason why the forex market is the largest, most liquid financial market in the world. It dwarfs other markets in size, even the stock market, with an average traded value of around U.S. $2,000 billion per day. (The total volume changes all the time, but as of August 2012, the Bank for International Settlements (BIS) reported that the forex market traded in excess of U.S. $4.9 trillion per day.)
One unique aspect of this international market is that there is no central marketplace for foreign exchange. Rather, currency trading is conducted electronically over-the-counter (OTC), which means that all transactions occur via computer networks between traders around the world, rather than on one centralized exchange. The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney - across almost every time zone. This means that when the trading day in the U.S. ends, the forex market begins anew in Tokyo and Hong Kong. As such, the forex market can be extremely active any time of the day, with price quotes changing constantly.
Spot Market and the Forwards and Futures Markets
There are actually three ways that institutions, corporations and individuals trade forex: the spot market, the forwards market and the futures market. The forex trading in the spot market always has been the largest market because it is the "underlying" real asset that the forwards and futures markets are based on. In the past, the futures market was the most popular venue for traders because it was available to individual investors for a longer period of time. However, with the advent of electronic trading, the spot market has witnessed a huge surge in activity and now surpasses the futures market as the preferred trading market for individual investors and speculators. When people refer to the forex market, they usually are referring to the spot market. The forwards and futures markets tend to be more popular with companies that need to hedge their foreign exchange risks out to a specific date in the future.
What is the spot market?
More specifically, the spot market is where currencies are bought and sold according to the current price. That price, determined by supply and demand, is a reflection of many things, including current interest rates, economic performance, sentiment towards ongoing political situations (both locally and internationally), as well as the perception of the future performance of one currency against another. When a deal is finalized, this is known as a "spot deal". It is a bilateral transaction by which one party delivers an agreed-upon currency amount to the counter party and receives a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present (rather than the future), these trades actually take two days for settlement.
What are the forwards and futures markets?
Unlike the spot market, the forwards and futures markets do not trade actual currencies. Instead they deal in contracts that represent claims to a certain currency type, a specific price per unit and a future date for settlement.
In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves.
In the futures market, futures contracts are bought and sold based upon a standard size and settlement date on public commodities markets, such as the Chicago Mercantile Exchange. In the U.S., the National Futures Association regulates the futures market. Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized. The exchange acts as a counterpart to the trader, providing clearance and settlement.
Both types of contracts are binding and are typically settled for cash for the exchange in question upon expiry, although contracts can also be bought and sold before they expire. The forwards and futures markets can offer protection against risk when trading currencies. Usually, big international corporations use these markets in order to hedge against future exchange rate fluctuations, but speculators take part in these markets as well. (For a more in-depth introduction to futures, see Futures Fundamentals.)
Note that you'll see the terms: FX, forex, foreign-exchange market and currency market. These terms are synonymous and all refer to the forex market.
Read more: Forex Tutorial: What is Forex Trading? https://www.investopedia.com/university/forexmarket/forex1.asp#ixzz525bWN7J6
Follow us: Investopedia on Facebook
Business Insurance Cost
CompareAQuote insurance costs pennies for the value that you get in insurance for your dollar. As a business owner or someone putting together a business plan, you know that one of the most important elements is business insurance and the accompanying cost of that insurance. There are many things to consider when planning out your business insurance needs and costs and it can save you precious time and money to consult with an independent insurance broker who can bring you multiple quotes from multiple business insurance companies. The independent brokers at Compare Insurance Quality services are uniquely qualified to help you with your business insurance needs. Our agents do not represent any one company for business insurance. Instead, we have access to hundreds of insurance companies around the globe, making it possible for us to bring you the multiple quotes you need to secure the very best coverage for all your business insurance needs at just the right cost to you. We will find the right fit for you no matter how large or small your business.Business Insurance Quotes
Part of any sound business plan will include business insurance. In order to decide which business insurance company is right for you, you need to obtain quotes. Sitting on the phone with different companies discussing levels of coverage to get quotes is not a productive use of your time and money. There are many different types of insurance you need to carry as a business owner. Much of it depends on the type of business you are engaged in as well as the number of people you employ. The independent insurance brokers at Compare Insurance Quality services are uniquely qualified to help you with your business insurance needs. Our agents do not represent any one company for business insurance. Instead, we have access to hundreds of insurance companies around the globe which enables us to bring you multiple quotes from multiple business insurance companies to help you get the very best coverage for all your business insurance needs. We will find the right fit for you no matter how large or small your business is.Small Business Insurance
As a small business owner you know how important it is to have the right kind of insurance coverage at a cost you can afford. The independent brokers at Compare Insurance Quality services are uniquely qualified to help you with your small business insurance needs. Our agents do not represent any one company for business insurance, but rather we have access to hundreds of insurance companies around the globe, making it possible for us to bring you the multiple quotes you need to secure the very best coverage for your small business insurance needs..Small Business Insurance Quotes
The more quotes you have when getting ready to purchase small business insurance, the better able you will be to keep your costs down. Only the assistance of an independent small business insurance broker like Compare Insurance Quality can save you valuable time and money in your search for the right policy for you and your small business.Small Business Insurance Cost
Every small business is unique and securing multiple quotes for your small business insurance is essential. With an independent broker from Compare Insurance Quality by your side to guide you, you can be assured of getting the right coverage for your business at a cost you can afford. Some basic types of insurance to consider when you are shopping for a policy include:For all your insurance needs, contact the independent insurance broker/agents at Compare Insurance Quality services. From simple enquiries, to quotes, the binding of policies, and the maintenance of your insurance portfolio for years to come, you can depend on Compare Insurance Quality to secure the best possible protection for you and your family against any type of small or disastrous loss. Simply fill out the form attached here, or give us a call today at the number listed above to get started!