The impact of foreign exchange market in day to day life

Forex market or foreign exchange market is the market place where trading of currencies take place. This is the largest market in the world by its volume. Every country possess their own currency. The currency is not valid to buy product in other countries. For example if you give US dollars for pizza in Italy, they would not accept this currency. It’s just an example, there are many large firms used to exchange huge currency in forex market. Central banks of all the countries are huge participants in forex market. The banks have one of the role to keep forex reserves. A survey result of Bank for international settlements (BIS) in 2007 shows that the global forex turnover is $3.3 trillion daily and it has increased to $4 trillion in 2010 despite of global economic recession in 2008. This data shows the significance of foreign exchange.

Transaction exchange in forex market is two types. A commercial exchange is transaction done on economic activities i.e. by import or giving loan to other countries. Speculative exchange is purely monetary transaction. Speculative transaction is always higher than commercial transactions.

Participants and forex brokers

Major participant in foreign exchange market is central bank of each country. Their role is to fix the exchange value of foreign currency in terms of their own currency in order to export and import. Other participants are commercial companies which trading products and service to other countries. Management firms which holds large public money such as pension funds and mutual funds etc., investment firms who want to invest in foreign securities, small retail foreign exchange traders with the help of brokers, money transfer companies and non-banking companies. Independent investors who wants to trade in forex market.

Participants are huge firms and companies. They need forex brokers to trade currencies in forex market. Visit the broker page http://www.independentinvestor.com/brokers/fx to know about brokers available. These brokers acts as intermediaries between the participants to recognize which firm offers high exchange rate and which firm offers low exchange rate. This function of bank make the participants to get best deal.

Role of forex brokers

Forex brokers earn commission by bringing the buyer and seller together for deal. He will not involve in transactions. This job is done by exchange market. By his knowledge and experience he can analyze the market trend and its behavior by drawing tables, graphs and charts to predict the future of market and helps the participants by recommending them. The participants choose the brokers by comparing them with other brokers . The qualities need to compare the brokers are the spread, commission they are collecting and the trading platform. Online broking caught everyone’s eye. It made the deal simpler than traditional telephonic trade. Discount brokers are there who gives discount in commission, but they do not provide suggestions and recommendations. Foreign exchange trade is not only important for central banks and multinational companies. Since it fix the exchange rate of currency, it determines the rate of products that common people of a country buy. So it is also significant for common people.