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Wednesday, February 16, 2011

Forex is (part 3)

Characteristics of foreign exchange trading
There is no uniformity in the foreign exchange market. With the transaction outside the stock exchange trading (over the counter) as a traditional market of foreign exchange trading, many foreign exchange market that relate to each other where different currencies are traded, so that indirectly means that "there is no exchange rate but the single currency dollar exchange rates vary depending on what bank or market maker is trading. However, in practice the difference is often very thin.
The main trading centers are in London, New York, Tokyo and Singapore, but banks throughout the world become participants. Foreign exchange trading occurs throughout the day. If the Asian markets ended the European markets opened and at the European markets ended the American market began and returned to Asian markets, except on weekends.

Very little or no "insider trading" or information "insiders" (Insider trading) that occurred in the foreign exchange market. Fluctuations in currency exchange rate fluctuations are usually caused by actual monetary flows as well as by expectations of monetary flows caused by changes in the growth of Gross Domestic Product (GDP), inflation, interest rates, budget and trade deficit or trade surplus, merger and acquisition and other macroeconomic conditions. Major news is released publicly, so that more people can access the news at the same time. However, large banks have an important value that they can see the flow of movement "order"currency from customers.

The currency traded with each other and every currency pair is a separate product such as EUR / USD, USD / JPY, GBP / USD and others. Factor in one currency such as USD will affect the market value in USD / JPY and GBP / USD, this is a correlation between the USD / JPY and GBP / USD.

On the spot market, according to research conducted by the Bank for International Settlements (BIS) [5], the most heavily traded products are

         * EUR / USD - 28%
         * USD / JPY - 18%
         * GBP / USD (Also Called sterling or cable) - 14%

and currency to U.S. dollars "involved " in 89% of transactions conducted, followed by the Euro (37%), yen (20%) and Pound Sterling (17%).

Although trading in the euro increased rapidly since the currency was issued in January 1999 1999, U.S. dollar still dominates the foreign exchange market. For instance in trade between Euro and non-European currencies (XXX), usually always involves two types of trade that is EUR / USD and USD / XXX, exceptions to the trade only the EUR / JPY which is the currency pairs that are still traded in the spot market between banks.

source: forex III