September 28, 2016

Question:How does Forex (Foreign Exchange) market work? Why market price changes constantly?


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Forex(or Foreign Exchange) is an “Inter-Bank market” that took shape in 1971 when global trade shifted from fixed exchange rates to floating ones.

We didn’t have the exchange market for currencies before then, and no computers were calculating the floating values of each currency.

Forex market is formed by billions of transactions made by agents involving exchange of specified sums of money in a currency unit of any given nation for currency of another nation at an agreed rate as of any specified date.

There is no central of Forex market

Anyone can exchange currencies anywhere and with anyone, and if you exchange a currency for another, that is one “Foreign Exchange”.

As in there is no central of the market, and the floating price of each currency is determined by the agencies such as banks who are exchanging the currencies with another.

FXTM Official Website

How the price of currency changes?

During exchange, the exchange rate of one currency to another currency is determined simply by supply and demand, exchange to which both parties agree.

Now that whole world is connected with internet momentarily, the prices of each currency is almost the same with any agencies, but there is a small exchange price differences depending on the agency.

For example the prices you are seeing through FXTM’s platforms are the prices exchanged by the Liquidity Providers (mega banks which create Inter-bank markets).

In this case, FXTM is giving you the access to join the stream of billions of money exchanged by these mega-banks.

So the structure of this financial market is as below:

  1. Traders (who wants to join the market)
  2. FXTM (Forex Broker making a bridge between traders and LPs)
  3. Liquidity Providers (who are creating the huge Foreign Exchange Markets)

Want to join the Forex market? Find out more information about online investment in FXTM Official Website.

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