What is Forex?
The World's Biggest Liquidity Market
The foreign exchange (Forex) is the direct exchange of currency between various countries. Presently, the trading volume of the Forex market has achieved 190 billion dollar, which is equal to 46 times larger than the futures market, based on this reason, this is the world’s biggest liquidity market. In most of the developed countries, the financial system is fully open and the Forex is being traded freely, Forex has become one of the markets which closely linked to the individual life.
In the past the Forex market is being carried out by the large funding banks and other huge fund managers, but along with the technology innovation and the development of the online transaction platform, the small Forex traders could also directly participate and makes profit from the Forex trading.
The Function of the Forex Market
The function of the Forex market relies on:
- To balance the prescription of the Forex fund.
- Provides method to avoid risk from the Forex market. Some companies or banks, because have the forward revenue and the expenditure activity from the Forex market, to avoid lost from the forward fluctuation, it is possible to do forward trading from the Forex market, to avoid the exchange risk.
- To provide convenience for the Central Bank to stabilize exchange rate. Because Forex market can be intervened by the large inflow of short-term fund from worldwide which will cause the Forex market to be bullish or bearish, so the Central Bank must intervene in the Forex market, the Central Bank could stabilize the currency through the Forex market by buying and selling the currency in a very large amount.
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