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What Is Foreign Currency Trading

Without any doubt, so many developing countries actually measure their own economy by so called GDP. In fact, the internationally accepted currency is the US dollar. Well, dollars are not so necessarily the currency of normal and usual usage in many different countries. For sure, every country in the world needs coal and also oil to produce energy and to guarantee faster and better development. And the actual development is really achieved via industrialization and all industries definitely run on electricity. And so this electricity is actually produced in power stations that utilize either gar or coal or petroleum to drive their turbines that produce needed electricity.

Besides, for producing oil from various countries which produce oil, dollars is the main currency that is used. Of course, every country in the world needs to have some particular reserves of foreign exchange to guarantee sustenance. And many various countries actually carry out their international businesses in dollars as well. So each export order which is really completed earns revenue for some particular country in the US dollars. Of course, the true wealth of every country is determined as well by the actual amount of the foreign exchange reserves which it currently has.

In fact, the actual exchange rate of dollar is obviously determined by the forex reserves and also gold reserves which the country has at the moment. Well, foreign currency trading is certainly categorized in various levels, for example like inter-bank market which involves the commercial banks and also dealers in securities. And there forex trading really happens with the ask and bid prices of the foreign currencies being traded. Of course, that determines as well the current exchange rate of some particular currency against other foreign currencies.

Besides, all inter-bank foreign currency trading transactions account for nearly fifty three per cent of the total transactions. Thus the next levels of forex players are such as mutual funds, pension funds and so on. Moreover, all central banks of the countries get involved as well in foreign currency trading. And they do that in order to really control the money supply into these countries, thus influencing the bank interest rates and also inflation. Well, those national central banks utilize the forex money to assist to stabilize the international and also national markets.

In addition, a bit part of foreign currency trading is quite speculative in nature. For sure, this speculative nature of that kind of trading is certainly kindled by so called hedge funds operations which many different multi-national organizations actually undertake. Moreover, there are those persons who also get involved in forex trading and they are known as retail brokers. And finally, foreign currency trading was greatly affected as well!

Before you decide to make a forex investment or start forex trading yourself, better find a nice forex book and read more about forex market – this will save you from lots of troubles and traps.


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