Forex Market Basics
the foreign exchange market is known as the forex market, currency trading market or just fx. it is a market where participants buy, sell and exchange currencies. it facilitates the trade of ? in the dollars ? transactions every day. there is no central location. instead, money is traded through a network of international dealers and brokers. businesses use the forex market when they're buying products from other countries. for example, suppose a us company wants to buy a car engine from the uk. the engine is transfered from the uk to the us and the us company has to convert us dollars to pounds to pay for the good. the us company uses the forex market to convert dollars to pounds at the current exchange rate. speclators will tend to buy currencies that they think will increase in value and sell currencies they think will decrease in value. unlike a stock, currency valuation is relative to other currencies and that's why the prices given in relation to a second currency. there are many factors that contribute to a change in exchange rate including monetary policy, poitical stability, interest rates and imports and exports to name a few.