The foreign exchange or FOREX market is an over the counter or decentralized market for the trading of various currencies. This market basically decides foreign currency exchange rates for each currency. It includes all aspects related to trading, purchasing and selling of currencies in current or decided prices. In order to participate in the foreign exchange market one needs a dealer, an investor or even a speculator.
A dealer in the foreign exchange markets can be any financial or commodity dealer with a minimum investment of capital. However in this market any investor can invest as a trader or speculator and become a participant of the forex market. Speculators buy more in large quantities in order to realize small profits by utilizing short-term price movements of particular currencies in order to gain profit. Investors on the other hand trade currencies in order to realize long-term profits by using a systematic approach. They use a technique called charting to analyze currency values and make predictions about currency price movements.
A speculator in the foreign exchange markets can be anyone interested in trading foreign currency in order to make a profit. They usually purchase foreign currencies with the objective of selling them when the value increases. Speculation is made through the purchase and sale of currencies with the objective of profiting from changes in the foreign currency exchange markets. No physical commodity exists that cannot be bought or sold in the foreign exchange markets. The commodity that cannot be traded includes gold, bonds, securities, commodities such as oil, gold, silver and other metals, money and various international currencies.
Trading in the foreign currency exchange markets is done through what is called a foreign exchange broker. Forex brokers do not actually trade currencies but they perform currency exchanges. They usually charge a brokerage or commission fees when conducting a trade. If you want to trade in the currency markets yourself, you will need to find an experienced forex trader to help you do it.
One of the most widely traded currencies in the forex markets today is the Japanese yen. Japan has one of the largest economy in the world and this is reflected in their currency value. One Japanese yen is generally worth about US$0.80. In recent years the value of the Japanese yen has increased considerably, which has made it one of the top investments for many private individuals and businesses. For example, if you want to invest in stocks, you could purchase shares in a company that makes Japanese yen or if you want to purchase property, you could invest in Japanese Yen.
Another thing that affects the value of currency is the interest rate. The interest rate determines how much you will have to pay in order to borrow funds in the foreign exchange market. As a trader you want to take note of the interest rate and follow it closely because this can affect the amount of profit that you will make on your trades. The more interest rate there is, the more money you will make when you sell currencies and the less money you will have to pay to borrow funds from the banks.