Augment Your Knowledge About the FOREX Market

The foreign exchange, or FOREX, market is considered as the largest financial market worldwide. This market is present in a place where a national currency is traded for another national currency. Allow us to tell you more about the FOREX market, including its participants, the factors that impact currency trading and other information related to this exciting trading buisness.

The interbank market is one of the financial markets and institutions participating in the FOREX market. It focuses not only on commercial turnover, but also concentrates on speculative trading on a daily basis.

Commercial companies also form part of the FOREX market. Compared to the trading activities done by banks and currency speculators, commercial companies, in most cases, trade smaller amounts that have little short term effect on market rates.

Aside from banks, commercial companies and currency speculators, other FOREX market participants include central banks, hedge funds, investment management firms, retails FOREX brokers, and governments.

The factors that impact currency trading are categorized into three types, namely, economic factors, political conditions, and market psychology.

There are several elements that form part of the economic factors. One element is the economic policy, which is composed of government fiscal policy and monetary policy. Economic conditions also form part of the economic factors, and they include government budget deficits or surpluses, balance of trade levels and trends, and economic development and health.

Political conditions also affect currency trading. Among the conditions that are believed to have a negative impact on a country's economy are political upheaval and instability. On the other hand, political faction is perceived as a condition that may have a positive impact on a nation's economy.

There are several ways in which market psychology, or trader perceptions, can influence the FOREX market. Some of these ways include flights to quality, long-term trends, and economic numbers.

If you are curious to know which financial markets and institutions are recognized as the top ten currency traders, results of a Euromoney FX survey in May 2006 indicated that the top ten traders include Deutsche Bank, UBS AG, Citigroup, Barclays Capital, Royal Bank of Scotland, Goldman Sachs, HSBC, Bank of America, JPMorgan Chase, and Merrill Lynch.

As far as currencies are concerned, the most traded ones include, but not limited to, the United States dollar,the British pound sterling, the Eurozone euro, and the Australian dollar.

We hope that the information we provided will be of help to you with regard to increasing your knowledge about the FOREX market.