Education

Forex

Forex is a foreign exchange market. This is one of the elements of the global foreign exchange market. The daily volume of trade at the FOREX foreign exchange market makes 5 trillion US dollars which exceeds the volumes of the global stock market many times.

The following organizations are the foreign exchange market participants.

1. Central bank. It underpins the national currency.
2. Commercial banks. They fulfil client requests and preserve the liquidity of the owned assets.
3. Brokerage houses and financial companies are following. These organizations make a profit thanks to the management of financial assets and act as intermediaries.
4. The exchange is another element of the foreign exchange market. The exchange is a legal entity; we have already spoken about. It is an intermediary between Brokerage houses and financial companies.
5. Private traders

The currency pairs

There are hundreds of currencies around the globe, which are often classified under three main groups, based on liquidity and popularity. These are the majors, minors and exotics.

Majors – The most liquid or most actively traded currencies.

Majors account for 85% of the total volume traded in forex markets. At ThinkMarkets, our spreads on majors are tighter than the spreads of minor or less traded currency pairs.

Minors – Not as heavily traded as the majors and often more volatile.

Spreads for minor pairs are also typically wider because of the medium-sized market liquidity compared to the major pairs.

Exotics – Exotic currency pairs are traded more rarely.

Because of their low trading volume, the currencies are not considered liquid. They tend to be more costly to trade because of the wider spreads and traders add them to their trading due to their higher risk/reward profile.