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Basic Terms |
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Forex traders speak a language of their own. In order to be an active trader, you need to understand what some basic terms mean.
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Foreign Exchange Exposure |
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Transaction exposure results from transacting business in a currency that is different from the currency of the company’s home base, such as when companies import or export goods and services denominated in foreign currencies, or when they borrow or invest in foreign currencies.
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Major Participants In The Foreign Exchange Market |
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Governments have requirements for foreign currency, such as paying staff salaries and local bills for embassies abroad, or for arraigning a foreign currency credit line, most often in dollars, for industrial or agricultural development in the third world, interest on which, as well as the capital sum, must periodically be paid...
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Risk Considerations Regarding Spot Transactions |
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A foreign exchange contract poses a risk, much like that a bank incurs whenever it makes a loan to companies or individuals, that the client in question will not deliver the appropriate currency on the agreed upon time.
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Roles Played By Participants In the Market |
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Market makers are those market participants that buy and sell currencies as market makers. Dealers/traders constantly quote a two-way price to another market maker, but not to corporations.
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Types of Banks |
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The Bank of England, the European Central Bank, the Swiss national Bank, the Bank of Japan and, to a lesser extent, the Federal Reserve Bank often enters the market to correct unreasonably large movements, often in combination with one another.
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Economic Influences On The Market |
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This is the average level of prices on a fixed market basket of goods and services as purchased by consumers, excluding food and energy. This monthly report is widely followed as an inflation indicator.
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History
