Forex guru

Forex is a type of trading system which involves transactions in foreign exchange with traders earning from currency value fluctuations. This trade involves a lot of risk and a person can easily mislay his funds if he does not pay attention to forex market analysis. But it is also possible for a person to transact up to $100,000 by just using $1000 of his investment. Many people get attracted to become forex market trader because of the fact that about $3.5 trillion is per day turnover of this industry according to the estimates done by BIS. The Main Players The industries or financial institutions which are part of forex trade include hedge funds, companies doing money transfers, banks, firms involved in investment management, central banks, forex companies which fall in the category of non banking institutions, commercial companies and retail traders. Common Terms If you also interested in becoming forex market trader then you should be aware of few of the terms which are commonly used in this industry, some such terms are: 1. Forward 2. Swap 3. Spot 4. Option 5. Future Let us now briefly look at these terms and how they are used in forex trading. 1. Forward: The forward transaction is used for managing forex risks. Here money doesn�t exchange hands till a prefixed date in future and both parties freeze upon the exchange rate for the future transaction. When the transaction occurs the current rates are not taken into consideration. 2. Swap: The swap is one form of forward transaction where both seller as well as buyer transact and agree to cancel the transaction on a future date. 3. Spot: In this forex transaction the delivery happens within 2 days. This is a short time transaction and there is no contract and the dealing is directly in cash. It is one form of direct exchange where interest is not part of the transaction. 4. Option: Here the owner can exchange currencies but there is no obligation for him to do so. 5. Future: This transaction involves time frame of 3 months and due interest is also part of the transaction. What Forex Rates Depend On? The primary factors on which forex rates depend are; political conditions, economic conditions and psychology prevailing in the market. 1. Political Conditions: The political and regional events occurring in a region have an impact on foreign exchange rates. Economic conditions and how stable the government is also affect the rates. 2. Economic Conditions: It is a very broad category and involves aspects like 1. Budget deficits 2. Trade balances 3. Inflations 4. Economic policies 5. Monetary policies 6. Growth of economy 3. Psychology prevailing in the market: The foreign exchange rates are highly dependant on market�s psychology which in turn gets influenced by long term and trends, indicators in the economy, anchoring and flights to quality. The indicators in the economy among other things include certain few facets like trade balance, money supply and inflation. A Final Note Finally we can arrive at the conclusion that forex transactions are interesting and making good gains is possible only if you are aware of what is happening in the market and take judicious decisions.