Characteristics : Forex Trading has no unified or centrally cleared market for the majority of FOREX trades,
and there is very little cross-border regulation. Due to the over-the-counter (OTC) nature of
forex trading markets, there are rather a number of interconnected marketplaces, where
different currency instruments are traded.
So,
in forex trading there is not a single dollar rate but rather a number of different rates
(prices), depending on what bank or market maker is trading.
In practice the rates are often very close, otherwise they could be exploited by arbitrageurs
instantaneously.
The main forex trading centers
are in London, New York, Tokyo, and Singapore, but banks
throughout the world participate. Forex trading happens continuously throughout the day;
as the Asian trading session ends, the European session begins, followed by the North
American session and then back to the Asian session, excluding weekends.
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Currency PAIRS : In forex trading currencies are traded against one another. Each pair of currencies thus
constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO
4217 international three-letter code of the currency into which the price of one unit of XXX
is expressed.
For instance ,
GBP/USD is the price of the British Pound expressed in US dollars, as in 1 GBP =
2.0725 dollars.
Out of convention,
the first currency in the pair, the base currency, was the stronger
currency at the creation of the pair. The second currency, counter currency, was the weaker
currency at the creation of the pair.
The factors affecting XXX will affect both XXX/YYY and XXX/ZZZ. This causes positive currency
correlation between XXX/YYY and XXX/ZZZ.
So, factors affecting EURO will affect EUR/USD , EUR/JPY and EUR/CHF …
Also ,factors affecting JPY will affect GBP/JPY ,EUR/JPY ,USD/JPY and NZD/JPY.
