Forex Trading was well established from the beginning of twentieth century. But shifting from the gold standard to fx standard in 1931 saw the real hype in fx market and for the next 4 decades the fx market underwent many changes.
Characteristics of fx market
a) Fx market is a global non-formal organisation and has no central market.
b) Since different financial markets have different operating times so fx market operates 24/7.
c) Since fx market deals with the transfer of different currencies so the stability of fx market has ensured the increased transfer of wealth.
d) Fx market can take shape of a penny stock market as well as a macro level market i.e it is suitable at every level of investment.
e) Fx market serves as a price discovery tool.
Persons involved in fx trading
a) Commercial banks
b) Exchange markets
c) Central banks
d) Firms
e) Private individuals
Fundamental Analysis essential in fx market
a) Study the demand for a currency over a time i.e capital analysis
b) Study the imports and exports of a country over a time i.e trade analysis
Risks involved in fx transactions
a) Measure of skewness in difference currencies.
b) Risk arising from hedging and other internal and external strategies.
c) Altering fx rates can influence an entity's operating effectiveness.
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