What is Forex? Principles, Objectives, Functions, and Perpetrators

 What is Forex? Principles, Objectives, Functions, and Perpetrators

Each country has its own currency and policies. Of each currency owned by each country has its own value from the currencies of other countries. This value is the exchange rate of a currency between one type of currency with another currency. So what is meant by Forex? Forex (Foreign Exchange) is a type of trade or transaction that trades one country's currency against another country's currencies that involves the world's major financial markets on a 24-hour basis. Or if in Indonesian it is called the Foreign Exchange Market, abbreviated as Forex.

Then what does it mean by 24 hours of continuous rotation? The point is that the forex market (foreign exchange) starts from the New Zealand and Australian markets which runs from 05.00 WIB to 14.00 WIB, then to the Asian markets, namely Singapore, Japan, and Hong Kong, runs from 07.00 WIB to 16.00 WIB. Then to European markets, namely Germany and the UK take place at 13:00 WIB until 22:00 WIB, the last to the United States market took place at 20.30 WIB until 10.30 WIB then returned to New Zealand and so on.

According to a BIS (Bank International for Settlement) survey or world central bank, conducted at the end of 2004, the value of foreign exchange market transactions reached more than USD $ 1.4 trillion per day. Given the acceleration of these high price movements, the Forex market has also become the most popular alternative because ROI (return on investment) and the benefits to be gained can exceed the average trade in general.

Besides that the Forex market also has a very high risk, because high price acceleration can also drop dramatically.

The Forex market is a unique market because:

    Trading volume
    Extremely large market liquidity
    The amount and variety of traders in the Forex market
    The trading period is 24 hours a day (except weekends)
    The scope of its spread

Difference between Forex Trading and Money Changer

An example of forex trading is for example you buy Yen (Japanese currency), while simultaneously you sell Pounds Sterling (British currency). Forex trading (Forex trading) is different from Money Changer, if Money Changer needs to exchange money only for the purpose of transacting in a country while forex trading buys or sells online a number of currencies with the aim of making a profit.
Forex Trading Principles

The advantage of forex trading can be obtained from the difference between the selling price and the purchase price of a currency. For example, we buy US $ 50 at the exchange rate of Rp. 13,500.00 per US Dollar. Then we will spend Rp.675,000.00 to get the $ 50. Three days later the value of the US Dollar strengthened until the exchange rate became Rp.13,700.00 then we will sell US Dollars for Rp.685,000.00 with a stronger US dollar we will profit 100 thousand rupiah.

We can buy first (open buy), then close by selling (sell) or vice versa, make a sale first, then close by buying. So fortunately or not, this forex trading profit depends on the exchange rate between one currency to another and the way we see market opportunities.

The Purpose of Forex Trading

In general, forex trading aims to get profits or profits from the ups and downs of the exchange rate. Forex market conditions can change up and down dynamically, at any time can change as there are political, economic, social and so on. Now with this condition it will be an opportunity for traders to make a forex trade.
Forex Market Function

The functions of the forex market can be broken down into:

1. Simplify the exchange of a currency.
2. As a guarantee that the value of investment funds is not reduced or lost, when selling forex in 2 different markets.
3. Benefit from the difference in the currency itself.

Actors in the Forex Market

1. Bank

Banks have an important role in the forex market. The Interbank Money Market (PUAB) fulfills the needs of the majority of the velocity of money in the business world as well as the needs of daily transactions that can reach up to trillions of dollars. Transactions can be done for and on behalf of bank customers, but if in large amounts, the transaction is in the name of the bank itself. Most transactions are in the interest of the bank or in the interests of the owner of the bank itself.

PUAB is also used by forex brokers to bring together sellers and buyers. In this case, forex brokers get no small profit. But now the PUAB system is rare and replaced with a more efficient electronic system. Like Reuters Dealing 3000 Matching

2. Business world

The business world becomes one of the players in the foreign exchange market because of the activities and needs of the company in paying the price of goods or services in foreign currencies. Foreign currency needs of companies are often small in value when compared to banks, forex trading conducted by companies often only affects very little impact on the exchange rate of the currency market. But the flow of foreign exchange trading from companies in the long run is an important factor for the direction of the exchange rate of a currency.

3. Central bank

The central bank always strives to control the money supply, inflation, and or even interest rates, often choosing a target, both official and informal, against the exchange rate of the country's currency. The central bank can also use its foreign exchange reserves to stabilize market prices. Therefore the central bank plays a very important role in the forex market.

4. Investment management company

Investment management companies are usually account managers on behalf of their customers such as foundation donations and pension funds. The company transacts in the foreign exchange market to conduct share purchase transactions abroad. The purpose of foreign exchange transactions for them is not for investment or for the purpose of obtaining maximum profits.

5. Hedge funds

Hedge funds are an investment company that runs speculative transaction business activities for profit.

6. Foreign exchange brokers

Foreign exchange brokers are companies that provide intermediary services for the interests of their customers in the financial market sector by obtaining compensation for those intermediary services.

That is an explanation of forex, its principles, objectives, functions and players. If you want to do forex business, be careful in taking steps because it can make you suddenly rich quickly and can dredge your funds in an instant, so beware, hhe.