When you are involved in Forex Trading,INTERBANK will normally be mentioned and discussed. So What exactly is INTERBANK? The name simply says the exchange of currency rates or informations between large banks and institutions, which will act as platform for their own clients or even themselves to trade (Buy/Sell) in the currency.
The word INTER basically means between two and BANK refers to an institution that takes in deposits from people. The forex market has advanced so much that the term INTERBANK now refers to anyone that is trading the currency market.
The quotes that you obtain for Bid (buy) and Ask (sell) are all from reliable sources. These quotes are normally made up from the top 300 or so large institutions. This ensures that if your broker place an order on your behalf, the institutions that they have placed the order with is capable of fulfilling that order.
Now although we have spoken about orders being fulfilled, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words the person or institution that bought or sold the currency has no intention of actually taking delivery of the currency. Instead they were solely speculating on the movement of that particular currency.
Over 90% of all currencies are traded against the US Dollar. The next four most traded currencies are the Euro (EUR), Japanese Yen (JPY), Pound Sterling (GBP) and Swiss Franc (CHF).
As currencies are normally traded in pairs or exchanged one for the other when traded, the rate at which they are exchanged is called the exchange rate. These four currencies traded against the US Dollar make up the majority of the forex market and are called major currencies or the majors.
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