There are three basic elements in the foreign exchange market (Forex), which should be known by traders. These three elements are included in a trading system which is one of the main tools that must be possessed by every traders. Once the system was created, trader must know the system is working, recognize the symptoms of faults and weaknesses of the trading system, as well as optimism that the system would work fine creations. Therefore, you need to understand three important elements in the Forex market before completing a system.
These three elements are:
1. Elements of Geographic
You must know that the Forex market is one of the largest and widest in the world. He is always open 24 hours non-stop. Therefore, no matter if you are English, Japanese, American, or Singapore, market will still reach all Forex traders in the world at any time.
Most of the major exchanges are in Singapore, Hong Kong, Tokyo, Bahrain, London, New York, San Francisco and Sydney. Geographical element Forex market is what can help new traders realize how much trading going on around the world.
2. Functional Elements
Forex basic function is not to exchange currencies worldwide. When trading occurs, partner countries would convert their revenue from foreign currencies into their domestic currency. So that it is possible when the purchasing power of the country strengthened, the purchasing power of other countries might be weakened. Forex trading is very helpful in the trade of goods between countries, as well as the provision of financial credit.
3. Elements of Participants
Globally two users Forex:
a. Bank (usually referred to as the wholesale market)
b. The client or individual traders (commonly referred to as the retail market)
On these two categories there are five types of participants. The first type is the bank and non-bank. For the type of non-bank typically consists of large brokers as a fulfillment partner of funds from the client to the market. While the second type is composed of individuals, commercial enterprises, and other investments. This group consists of importers, exporters, tourists, and investors or traders. They often use the Forex market in order to increase investment. The second group often use Forex to protect their values and assets, in anticipation of reducing the risk of losses.
Investors are subdivided into types of speculators and arbitration. These people take advantage of the market to make money for themselves. They make money from Forex for themselves and act according to their wishes. It can be said that these two types of investors are likely to make a profit from the movement of currency exchange rates. Sometimes the big banks get into this group.
Another group which also falls into the Forex is the central bank. The central bank has the power to change the value of the currency, or at least try to change. Each action of changing currency values the central bank is done with a specific purpose. Unlike investors, central banks in each country aim to influence the market, so that the value of the domestic currency of their country awake and provide benefits to the state. So it is not harmed both exporters and importers.
Forex brokers are the last group of participants in Forex trading. They are the party that facilitates trade, but does not act as a partner investor or trader in the transaction. They generally charge a fee for services rendered, in the form of commission.
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