What is Foreign Exchange Markets?

The foreign exchange or Forex markets are large financial markets that fluctuate in price very regularly where the value of one currency is related to that of another. 

Need of foreign exchange market

The foreign exchange markets help to make decisions on how valuable a particular currency is traded. It is a worldwide, decentralized exchange platform for the trading of various currencies. This market decides foreign exchange rates according to supply and demand. 

  • It consists of all aspects of the buying, trading and exchanging currencies at current or planned prices. 
  • The main currencies traded in the foreign exchange markets are the U.S. dollar, the U.K. pound. 
  • Other less essential currencies traded in the Foreign Exchange markets include the Australian dollar, British pound and Swiss Franc.

Foreign exchange markets forex charts

The foreign exchange markets forex charts are essential in determining the position of the currencies traded.

  •  Foreign Exchange traders buy a currency that they believe will increase in value about another.
  •  To buy these currencies, they usually borrow them from banks at high interest rates. 
  • Borrowing from banks is risky. If the bank finds you are a terrible risk, they can take away your loan along with your money.

To make the transactions case study more interesting and informative, we can refer to Foreign Exchange Brokers Manual. Foreign Exchange Brokers Manual is a professional foreign markets trader prepares. 

Purpose of this Foreign Exchange Brokers Manual 

The primary purpose of this Foreign Exchange Brokers Manual is to give information about the types of transactions . 

  • It provides complete guidelines, options and risk management techniques and explains how to select the perfect broker. 
  • It is an incredible manual that has helped thousands of Foreign Exchange Traders to make successful transactions successfully.

India, Pakistan and Sri Lanka have finally declared independence from the British, and they are now the proud national heroes. India has come through a horrible century of civil war and has built a solid and peaceful country. 

On the other hand, Pakistan has struggled hard to build itself up and become a mighty nation. Since independence, India has had internal problems like instability, terrorism and communal conflict. But Pakistan has managed to establish itself as a peaceful country.

Sri Lanka is still developing and needs much development in infrastructure development. As independence approached, Sri Lanka was invaded by Russia, Japan, France, and many other nations. After independence, a civil war broke out, which resulted in numerous fatalities.

During this period, guerrilla tactics were used to fight against the enemy. There have been numerous battles and skirmishes that resulted in many casualties, including civilians and soldiers alike.

The independence movement was peaceful and lasted for several months. But eventually, it turned into civil war. For several months, loyalists won battles, and many died. Finally, a new nation was formed and declared independence on September 16th.

Today’s situation:

Today, India and Pakistan are still rivals, but after independence, they have become friends and have pledged to work together. 

India is now trying hard to develop its economy so that it can become a strong world power. On the other hand, Pakistan wants to become stronger economically to attract more investment from multinational companies. 

However, the economic independence of a nation is not possible overnight. Both countries need to develop economic cooperation and infrastructural development.

Two types of independence movements

After independence, there were two types of independence movements: federalism and separatism. 

  • Federalism is when a country has more than one political system or government. Separatism is when a region of a country secedes into an independent state. Both these issues happened in former colonies like India, Pakistan and Sri Lanka. 
  • The reunification of Bangladesh, a formerly East Indian colony into Pakistan, and the subsequent independence of its political system from India have created a de facto separation of Bangladesh and Pakistan.
  • After the independence of Bangladesh, a move for a peaceful secession of that country from India was carried out by ethnic Hindu radicals. 

However, this action failed, and the government of that country moved in to prevent further unrest. India has been the leading player in helping to stabilize and promote economic growth in Pakistan.

The peace treaty between Pakistan and India

Although there is no peace treaty between Pakistan and India, the government feels that the former colonies have the right to be self-governing. 

Recently, India launched what they call “Cooperation and talks with Pakistan” to help end “unrest in the past”. 

However, this initiative was met with street violence in the country.

For this reason, India has not yet stated that they will go for peaceful secession in any of their former colonies.

Both of the sides must settle down and live peacefully.

Foreign Exchange is simply the exchange of one currency for another with the help of several international banks. This market decides international exchange rates for each currency simultaneously.

 It comprises all aspects of purchasing, selling and exchanging different currencies in current or predefined quantities at stipulated or agreed prices.

How does Foreign Exchange affect us? 

Generally speaking, Foreign Exchange provides a marketplace where the participants can transact and buy and sell currencies as and when required. 

  • The main benefit of Foreign Exchange is that it eliminates the physical movement of currency from one account to another and allows instant transactions. 

However, before one opts for the foreign exchange markets, they should conduct adequate research and determine the various pros and cons of such a market.

  • It is pretty evident that Foreign Exchange markets have more risks than any other market. So, one needs to take proper precautions so that losses can be minimized. 
  • There are specific techniques that one can use so that foreign exchange trades are carried on smoothly. Foreign Exchange transactions involve high risk, which can result in huge losses if not correctly managed. 

Hence, it is essential to understand all the factors involved before making the final decision of investing in Foreign Exchange markets.

Things you should reconsider before investing in the Foreign Exchange markets
  • The first step that you should take before investing in this markets is to carry out adequate research and analysis about the various players in the market and their strategies and modus operandi. 
  • You can get this information directly from newspapers, business magazines and the internet. One can also get in touch with experienced brokers who can help you understand various risks involved in Foreign Exchange trading through their experience.
  •  If you want to go in for Forex trading through an agent, you need to clearly understand the fees charged by these brokers and commissions for their services. 
  • You should always check out testimonials from people who have successfully made trades through brokers and try to contact them and ask them about their opinions regarding this markets.
  • Once you have understood the risks associated with Foreign Exchange trading, you can carry on the research regarding various companies and their different strategies and modus operandi. 
  • You can use the information gathered along the way for various future investments and finally decide after understanding all the details about the company. 
  • The next step that you should follow to understand this markets and transactions is to conduct proper research and analysis about various companies. 

For doing this, you should gather adequate information on company details such as the products and services offered, amount of capital employed, rate of return, the number of years the company has been in business, current market scenario, and prospects.

In Crux:

After gathering all the required information, you can finally start with the foreign exchange transactions case memo. It is crucial for you first to compare the returns that different companies offer before making any decision.

 In addition, you should compare the different foreign currencies being offered by these companies. This foreign exchange markets and transactions case memo will finally direct you to select one company or another to start your investments and transactions.