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Forex market : How does it work ?

Forex market or a Foreign Exchange Market is one of the largest financial markets in the world. As the name suggests, all the currencies in the world are traded in the largest intangible financial market in the world. The magnitude of transactions can only be imagined, considering the number of currencies and relevant traders around the world.

Why trade currencies?

Even before we understand the functioning of the forex exchange market, we should understand the significance of trading currencies. Since every region has their own particular currency in which transactions take place, a forex market is required to trade in regions other than their own reign. ?Region? can be dubbed as your respective country like the US dollar or the Indian Rupee or it can be dubbed as the entire continent like the European Euros. Any businessman wanting to trade his / her goods in a foreign country, a tourist wanting to visit another nation or an investor trading in currencies for sole purposes of gaining profits can be found as active participants in the forex market. Although tourists are not essentially traders but rare purchasers of the respective currency.

How do we trade?

Forex market is an intangible market. Here again, forex trading can take place through brokers. Online brokers provide you a retail space where investors need to open a forex trading account to carry out the transactions. Investors open a forex trading account to indulge in regular trading of currencies.Alice Blue is one of the leading firms that provides the facility of zero brokerage forex trading.

Fixed and floating exchange rate:

MACD is a very popular trend-supporting tool. This indicator does not tell you what the trend it. Instead, it tells you how strong the current trend is. So whether the trend is up or down, you can gauge the strength of the prevailing trend with this indicator.Anything that is traded in any market happens at a price. In the forex market, different currencies have different systems of trading at an exchange rate. Some government use the fixed exchange rate systems, where the government or the central bank of the country peg the currency with a particular exchange rate before opening it up to the market.Some countries follow the floating exchange rate system, where the exchange rate is decided by the market forces of demand and supply. India uses the floating exchange rate system at large although intervention by the government is legally allowed, if and when required.