The Foreign Exchange Market

INTERNATIONAL FINANCE

Under the guidance of Prof. Madhumita Chakraborty

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Contents

Introduction        

Currency trading        

FXCM Platform        

Risks in the forex market        

Trading Strategies        

Introduction

The foreign exchange market (forex, FX, or currency market) is a global decentralized market for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at current or determined prices. Central banks use their massive buying and selling capabilities to alter exchange rates through their open market activities and in many cases will do so not with profit in mind, but rather for any number of policy reasons. The foreign exchange market works through financial institutions, and it operates on several levels. Behind the scenes banks turn to a smaller number of financial firms known as “dealers,” who are actively involved in large quantities of foreign exchange transaction.

Currency trading

Currency trading is buying and selling currency on the foreign exchange market with the intent to make money, often called "speculative forex trading". The currency exchange rate is the rate at which one currency can be exchanged for another. It is always quoted in pairs like the EUR/USD (the Euro and the US Dollar). Exchange rates fluctuate based on economic factors like inflation, industrial production and geopolitical events. These factors will influence whether you buy or sell a currency pair.

FXCM Platform

FXCM Inc. (NYSE: FXCM) is a leading provider of online foreign exchange (forex) trading, CFD trading, spread betting and related services.  There are two techniques for trading in the currency exchange platform. Fundamental analysis and technical analysis. Fundamental Analysis is used in the Forex market to reach out to the fair value of the Forex trading instrument. Using this analysis, one can differentiate between the intrinsic and market value of a currency by using number of macro factors and economic indicators. It does not take into account the price movements and chart patterns, but assesses the well-being of an economy, industry or company. The fundamental traders examine the financial, competitive and management data at a company level; supply and demand forces at an industry level and macro-economic factors at a national level, to predict the future price movement of a stock or currency or commodity.