Until
recently, the FOREX market was not available to the
small speculator, this market was confined to larger
traders: major international commercial and investment
banks; international corporations; national and mulitnational
companies; corporate members, international money
brokers; currency traders etc. The large minimum foreign
currency transaction sizes and financial requirements
left this market in the hands of large FX speculators.
Now, with the ability to leverage* large positions
with a relatively small amount of capital (margin),
the online forex trading market is now liquid than
ever and available to every one.
Five
major currencies dominate trading activities in the
foreign exchange markets: the U.S. Dollar, Euro, Japanese
Yen, Swiss Franc and British Pound. For example, purchasing
the EUR/USD in the FOREX spot or futures market simply
means the purchaser is buying the Euro and selling
the U.S. Dollar in anticipation of the Euro gaining
value in relation to the U.S. Dollar on a particular
date. Similarly, the seller of a EUR/USD contract
would be selling the Euro against the U.S. Dollar.
Official figures show the U.S. Dollar is on one side
of 83% of all spot foreign exchange transactions.
The "spot" market simply refers to a currency
contract with a prompt valuation date requiring settlement
within two business days. Over the past several decades,
an increase in international trade and foreign investment
has made the economies of the world more interrelated.
New opportunities for investors have been created
with the fall of communism and the dramatic growth
of the Asian and Latin American economies. Today,
supply and demand for a particular currency is the
driving factor in determining exchange rates. Many
factors such as regularly reported economic figures
and unexpected news reports, such as disasters or
political instabilities, could also alter the desirability
of holding a particular currency, thus influencing
international supply and demand for that currency.
It should come as no surprise that many shrewd investors
have already taken advantage of the fluctuation in
exchange rates.
In
developing makets such as Pakistan, many investors
actively take part in FX markets in order to diversify
from securities, stocks, commodities, mutual funds
and real estate. In the business center of Pakistan,
Karachi has a number of forex traders who also trade
on KSE (Karachi Stock Exchange), followed by brokers
on the LSE and ISE (Lahore and Islamabad Stock Exchange).
Few forex companies in Pakistan are offering value
added services such as free buy and sell signals,
free research analysis on forex, free training courses
etc.
*
The high degree of leverage that is often obtainable
in forex trading can lead to large losses as well
as gains
