Is Forex the Alternative to Money Markets?

In the knowledge economy, what is known as the digital or electronic economy and the spread of electronic commerce, everything is done through the internet. In other words, what has been done through real institutions, organizations and governments, it is possible to replace many of its services over the Internet. Such as Qtbwain, Ripple and others. After Block Qin system there is now Forex or what is known in the foreign exchange market.

Forex, FX - The abbreviation for "Foreign Exchange Market" is the exchange of currencies against each other. Forex is one of the largest decentralized global financial markets for trading currencies. It contributes to international trading and investment through foreign exchange transactions. Previously, the Forex market was limited to major banking institutions, big speculators and large foreign exchange traders. It is now open to most investors, even small investors. The major forex trading centers are the very large deals between Trailing Forex includes hundreds of millions of dollars. In 2016, the daily forex volume was $ 5.1 trillion, according to BIS data. Forex is traded on the Internet at thousands of locations around the world, on phones and computer terminals. Forex trading can be done directly on your PC. There are risks you may face as with any business. But your losses can be few, and profits or gains can be quite spectacular.

The currency is traded through the purchase and sale of the major currencies that hold the basic share of operations in the Forex market namely the US dollar (USD) base currency, the euro (EUR) and the pound sterling (GBP), the Swiss franc (CHF), the Japanese yen (JPY) and the Australian dollar (AUD) ), And the Canadian dollar (CAD)) and other Arab and foreign currencies. A number of companies have emerged from foreign countries. In the portal of dawn electronic e.

There are many players in the Forex market. Some are trading to make profits, others are trading cautiously to avoid risk, and many are trading to secure their foreign currency needs to pay utility and commodity bills. The main participants in trading are commercial banks, so currencies are priced according to the banks market. In addition to commercial and central banks and multinationals, there are risk averse investors who are always ready to enter into various kinds of speculation. Among them are traditional retailers, and individuals who trade daily / weekly to earn the most money. Many of them make economic and political news, statistical releases, and influential speeches to decipher the future direction of currency rates. Others rely on technical indicators without paying attention to what happens in the financial world. You can also become a trader and join the business class.

But with all the advantages of Forex trading there are many risks associated with foreign exchange transactions, which can lead to large losses, which we will recognize in the following lines:

Risk of leverage: first what is the meaning of leverage? Simply means the percentage of the volume of the purchase or sale in any transaction to deposit the margin of security required .. Foreign exchange trading requires a small initial investment, called the margin, to reach large transactions in foreign currencies, and small fluctuations in prices can prompt the investor Girl has an extra margin.

Under volatile market conditions, the rush to use leverage may result in significant losses in increasing initial investments. You can simply lose all your money deposited with the foreign exchange broker as insurance margins.

Interest Rate Risk: We all know that interest rates have a significant impact on countries' exchange rates. In the event of higher interest rates in a country, it will strengthen and strengthen its currency as a result of the inflow of investments in the country's assets, as currency strength will result in higher returns. Conversely, if interest rates fall, their currency will weaken as investors may begin to withdraw their investments, due to the nature of the interest rate and its indirect impact on exchange rates. What matters to us here is that the difference between currency values ​​can cause a significant change in forex prices.

Operational risk: The counterparty in a financial transaction is the company that provides the asset to the investor (through which the transaction is made). Thus, counterparty risk refers to the risk of default from a foreign exchange trader or broker in a particular transaction. In foreign exchange transactions, spot and spot trades are not secured by a clearing house. In spot currency trading, the counterparty's risk arises from liquidity (liquidity). Under volatile market conditions, the counterparty may be unable or unwilling to contract.

Country risk: When deciding on options for investing in currencies, it is necessary to assess the structure and stability of the country that intends to invest in its currency. In many developing and third world countries, exchange rates are linked to the price of a global currency such as the US dollar. In these circumstances, central banks must maintain adequate reserves of that currency to maintain a fixed exchange rate. And defaults resulting in a currency devaluation. This could have major implications for foreign exchange trading and prices. Given the speculative nature of investment, if some investors believe that the currency will depreciate, they will begin to withdraw their assets, which will further devalue the currency. With regard to foreign currency trading, currency crises increase the risk of liquidity and credit risk as well as the weakness of the country's currency according to the trading site with confidence AVA.

Hence, the Forex market is attractive to many investors and thus will open the horizons for them and for all those who wish to invest in the future, in the sense that Forex will see a wider spread and to be surprised to be after the extension of the refuge of all financial investments and even the real and online platforms for trading, The Future These government and private institutions, which were the cornerstone in the formation and circulation of cash and money may disappear like the central banks and intermediaries and real money markets to be all managed through the Internet.


https://annabaa.org/arabic/economicarticles/16569