Table of Contents
What Is Forex
About The New York Stock Exchange
What Is Traded
What Are Forex Pairs
About The Market Size And Liquidity
What Is A Spot Market
What Is Futures Trading
What Are Options Trading
What Are Exchange-traded Funds
The Dangers Of Trading If You Don’t Know How
Sample Content Preview
What Is Traded
In very basic terms the stock market is where buyers and sellers meet and decide on a price for a particular commodity. There has to be a willing seller and a willing buyer for the transaction to be successfully completed. Previously these transactions were done at physical locations but now with the advancement of technology these transactions can be done virtually.
What Changes Hands
Typically the trading floor tends to consists of traders seemingly chaotically waving their hand around wildly while shouting out various instructions and messages. Then there is the more sedate style of trading where everything is done electronically with a network of computers.
Also simply described as the facilitating of exchange of securities between buyers and sellers it plays a certain role in reducing the risks of investing. It also provides for the arena for all interested parties to be able to conduct the relevant transactions of buying and selling.
The instructions to buy and sell stocks in a particular company will be given through a brokerage firm. This information will be passed on to those on the trading floor with the intention of linking the agreed price and commodity to the buyer and seller.
When this partnership is identified and the transaction exercise beings the virtual trading begins. Sometimes this is all done within a matter of seconds and can involve a huge amount of money.
There are several different categories of stocks traded at any given time frame. These may include common stock and preferred stock. As it denotes the common stock is an individual’s representation of a company and a claim to its profits made. The ownership of the stock allows the individual to vote on a per share basis to elect the board members but have no direct “say” over the decisions made within the company. As for preferred stock holders, this group does represent some degree of ownership but without the same voting rights and in the event of liquidation this group is paid off first nest only to the debtors.
What Are Forex Pairs
Though most transactions are not done virtually the money involved is very real indeed, and because a lot of these transactions involve buyers and sellers of different nations and companied the international element is present. Thus, the need to transact using duel currency or otherwise known as forex currency pairs.
Basically it means buying stocks in one currency and then simultaneously selling the same already purchased stock in another currency. Both these currencies will be clearly stipulated alongside each transaction for the perusal and knowledge of both buyer and seller.
Some of the more commonly used pairs are often divided into two categories of major and minor currencies. Major currencies are the most popularity used traded currencies which are USD, EUR, JPY, GBP, CHF, CAD and AUD, while NZD and ZAR are considered the minor currencies.
There are also circumstances that don’t require the common forex pairs to be used and instead other parings are allowed such as the replacement of USD with EUR, GBP, or AUD against other currencies. These types of transactions are commonly known as quote currency exchange.
Among the more popular pairings are:
• EUR – USD
• USD – JPY
• GBP – USD
• USD – CHF
• EUR – CHF
• AUD – USD
• NZD – GBP
And a few others
These forex trading pairs are a general trading tool for the many currencies of the world and are currently rising as the largest and least regulated market providing the greatest liquidity to inverters globally.
Simply put, it is buying a certain currency or commodity at a lower rate and then when there is a currency fluctuation that is advantageous to the seller then they said purchase is sold for a profit. Some consider this type of trading to be very volatile and risky but if done well the profits can be rather significant.
About The Market Size And Liquidity
There are several features that make the foreign exchange market rather unique and a little complicating. Thus it is not really a suitable endeavor for the faint hearted.
Among the elements it involves are the actual trading which is done in large volumes, the extreme liquidity conditions of the market, the large number and variety of traders and commodities available at any given time, the geographical dispersion of its participants, the long trading hours.
The aspect that makes all these so volatile is the variety of possible effects the exchange rates can have on the actual trading or transactions.
The various markets size trading could run in the billion to the trillions and the liquidity factor are also high in terms of percentages.
These market size participations run on a daily average turn over which is always significantly high even if it does not include global trading exercises.
Being the most liquid financial market in the world its traders include major banking houses, central banks, institutional investors, currency speculators, corporations, governments and retail investors.
As stated before this style of trading is very volatile indeed. In being so the profound effects of the currency market is almost always unpredictable. Political climates, international trading relationships, events and other underlying factor may contribute to the volatility and the possible liquidity rations involved.
All these various aspects contribute to the uniqueness of the market and its liquidity. An unphantomal number of traders and transactions are possible within a 24 hour time window.
In comparison with other markets, trading the exchange rate settings are with fairly low net margins. Some may even consider it the real market for perfect competition even with all the possible risks.
All these factor into the liquidity of the trading environment. Liquidity is a very important element because it determines how easily the price can change. This liquidity element of the forex trading enables huge trading volumes to occur with little effort but a lot of skill.Other Details
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