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The foreign exchange market is a global decentralized market for trading with currencies. This market decides the rates of the currencies. This is the platform where you can do all the relative things such as buying, selling, and exchanging currencies. This global forex industry is known as the biggest platform in terms of trading volume.
This global foreign exchange market works through the financial institute. This system is based on the assumption or the series of determination of profit or loss a currency pair at the given price. This online forex trading performs as the medium of exchanging or buying and selling on currencies. This market is made of the various financial institution such as commercial banks, central banks, brokerage companies, import and export companies, investment funds etc.
There are some important facts about forex trading. This global market is blessed with two tiers the first one in the interbank market and the second one is over the counter market.
- Interbank market involves in exchanging the biggest banks currencies with each other. In this trading, there are few numbers of members, but the traders are uncountable.
- In the second stage individual traders only trade.
So in these two process trading happens. In this current time, the second one i.e. over the counter market has gained popularity.
What does interbank trading process mean?
In general, if people say “currency market” then it means the inter-banking. This is a network where the banks trade currencies only. So every bank has their own dealing desk that is connected with each other.
This trade is little expensive, the minimum trade is one million of the currency. This is the top level market, unlike the stock market this foreign market doesn’t have any physical exchange.
In this interbank activity, central banks also take part in setting up the currency exchange rates. This increases the interest rate by stimulating traders to buy their currency as this provides a high return on investments.