In the last three decades, the value of financial markets has increased impressively. This rapid growth is primarily inspired by the fast development of technology sector as well as investors’ willingness to profit from stocks, bonds, foreign exchange rates and other financial products. Recent rapid development of technology, internet and software sectors lightened the access to financial markets. Just a few presses on your tablet, smart phone or computer and you can access the market as easily as you could never imagine a few decades ago. Either you love or hate trading you cannot ignore it. Financial markets generate tremendous value and at the same time affect our lives even if you do not consider that.
The only one market where money is both product and payment instrument for goods is interbank foreign exchange market. “Money makes money” perfectly justifies Forex market. Global interbank foreign exchange market known as Forex sometimes is identified as cash market. Forex exchange market exists whenever one currency can be exchanged to another. After expiration of “Bretton Woods” exchange rate system in 1971 Forex market similar to the market we are familiar nowadays has been formed. At the end of the Second World War, in the village know as Bretton Woods United Nations conference was convened where participants discussed how to recreate international economic system. Then, a firm that exchanged gold to cash was established. Later in 1971 “Bretton Wood” system faced many difficulties as U.S. stopped free conversion of gold into U.S. dollars. These actions caused a shift from fixed – rates to free - market exchange rates. Nowadays almost all countries have exchange rates that are constantly changing, that means, that they are determined by the monetary demand and supply in the market.
Conception of Forex
Reverse to an auction market where buyers and sellers agree on prices, in the call market prices are identified by the number of bid and ask orders. Also at a predetermined time intervals all bid and ask orders are transacted at once in the call market. The final price cannot be set by the buyers and sellers even if they impact on the market by showing how much they are willing to pay. As long as the trades happen only at certain periods of time this creates possibilities to make “bad” trades and that leads to higher risks. Forex market is a part of an international financial market, which can be characterized as a market established by brokers, banks, merchants, advisory firms and other financial institutions, where participants exchange information and make transactions by telephones, specific computer systems or fax. Definitely, currency market is not physically located in one particular place, it is a fast network scattered all over the world and this allows operations twenty four hours five days per week with the main goal to make “sell – buy” operations. Development of international economic relations has dramatically increased the size of the global currency market. Nowadays, banks are not the only participants in the interbank call market, such parties as mutual funds, large multinational corporations or insurance companies are able to borrow and lend money at interbank rates. Nevertheless, some countries have intentions to create rules that would enable only banks to participate in the interbank call market.
