Stocks, futures, bonds – this is an investment tool. Exactly the same instrument is the currency. Globalization is becoming deeper, because investors are increasingly included in their currency portfolios. In doing so, they have diversified portfolios, reduce risk, and thus retain the level of profitability.
The world financial market is huge. Part of it is the currency market Forex. Remember the currency exchange: you can change the Pound Sterling to Russian Ruble. Also working in the FOREX market, and only translated into the language of the market, you can buy Russian Ruble to British Pound.
Currencies are sold in pairs, as shown in the previous paragraph. The price of currency pairs reflect the current exchange rate of one currency against another. Money in the FOREX market is a commodity, it is not paradoxical sounds.
Twenty years ago, only large banks could relate to money as a commodity – because only they are sufficiently large amounts for the transactions. Then there were brokerage company, consolidating means a large number of customers. That is what has allowed to enter the market rates to companies, foundations and private traders who wish to earn well.
Each transaction in Forex – it is both a purchase and sale. Take, for example, buy EUR / USD. You buy Euro and sell USD. If the euro appreciate against the U.S. dollar, the increased cost of the currency pair EUR / USD. Thus, a profit. Order in effect to currency is a currency pair, standing in the numerator quotes. In this example relates to the disposal of euro. Currency numerator – the main currency quotes and currency of the denominator – it is counter (or quote) currency.
In order to perform a transaction on the Forex market, you must indicate the amount, currency pair and the operation that was going to commit. The purchase price indicated by the acronym ASK, sale price – BID. By ASK main currency is bought and sold a cross on BID – vice versa. Sale price should be lower than the purchase price, which is quite logical.
Between the BID and ASK prices, there is a difference, which is called the word «spread». Spread – fee for the opportunity to play in the FOREX market, a commission brokerage firms. Determine the spread of each brokerage company in different ways and depends on how high the risks in the market – higher than they are, the more widely spread.
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