Five Top Questions about the Forex Platform and their Answers

Top Questions and Answers in Forex

The Forex market is the vastest as well as the most liquid market in the world. Its unique functionality makes it stand out from regular stock markets, and also harder for beginners to understand. Below are some of the most frequently cited questions regarding the FX platform, and the answers to them:

How does the Forex Market Differ from the Other Markets?

The major difference between standard stock markets and the Forex platform is that there is minimal regulation for Forex. There are no bodies for governing the market, or arbitration committees to oversee disputes. The trade that takes place within this market is grounded solely on agreements of credit. However, the trade process in this platform is controlled effectively through a mode of self-regulation. In order to sustain a strong reputation, brokers need to be under the oversight of the country’s Forex association. 

Esteemed Forex brokers in India would be allied with the Securities and Exchange Board of India. Furthermore, a vast majority of traders only trust certified brokers. As a result, this channels the working of the market into an automatic sense of regulation without the help of external bodies.

What are the Major Currencies Traded in the Forex Market?

There are a wide variety of currency pairs that are present in this platform. But the primary pairs are the Euro/Dollar, the Dollar/Japanese-yen, British pound/Yen and Dollar/Swiss franc, Australian dollar/US dollar, US dollar/Canadian dollar and New Zealand dollar/US dollar. These seven currency pairs account for more than ninety percent of all of the speculative trading in the market.

Explain ‘Currency Carry Trade’

This is a considerably lucrative mode of trade in the FX market, one that is practiced by a range of entities. It is driven by the fact that world currencies are all bonded to an interest rate that is pre-determined by the central banks of the respective countries. The working behind carry trade is making long trades over a currency of high-interest rate and using a currency of low-interest rate to make the purchase.

What is it that we are really Buying/Selling in this Exchange?

The fact of the matters is that this is an exchange that does not have anything material being traded through it. The Forex market is driven purely on speculation and nothing physical is exchanged over it. The trades made over the exchange are logged digitally and are processed based on the value of the market.

Is there a Commission in this Exchange?

The Forex exchange is a principals-oriented market and, as a result, does not have commissions. Forex firms act more as dealers than brokers, and as a result, they draw revenues through the bid-ask spread.

These are some of the most frequently asked questions about the currencies exchange, and the answers to them.

Apart from building a solid knowledge of the FX market, bonding with experts can also help. WesternFX is among the leading brokerage firms in this area, one that has partnered with clients in several countries. If you need experienced professionals for Online Trading in India, we could bring you the solution.