An important part of this market comes from the financial activities of companies seeking foreign exchange to pay for goods or services. The market for commercial companies is often small compared to those of banks or speculators, and their trades often have little short term impact on market rates but nevertheless, trade flows are an important factor in the direction along after a rate change.
Note: Some multinational companies can have an unpredictable impact.
"Hedge funds" (Alternative Investments)
Alternative management is a way of portfolio management applied by some "hedge funds" said investment funds or "hedge fund" or in English "hedge funds").
They control billions of dollars of equity and may borrow billions more. They can overwhelm and interposition by central banks to support almost any currency, if the economic fundamentals are in favor of'' hedge fund''.
Eg : George Soros's Quantum fund has earned a reputation for aggressive currency speculation since 1992
Example of transaction
Here is a sample transaction "spot" USD-EUR.
First, it is necessary to specify that the FOREX transactions are on margins, it is not necessary to have U.S. dollars to play the USD - EUR, in effect, you are borrowing the USD necessary and you pay after .
Each transaction has therefore two stages: the opening (short sell a currency to buy another) and closing (resell the purchased currency and repay the overdraft on the currency sold).
A lot is usually 100,000 units. Should therefore hundreds of thousands of dollars to speculate in this market. There is nothing, in fact most brokers offer leverage of 20, 50, 100, or even 200 to one. Thus, with a leverage of 100 to 1, you invest 1000 USD and the broker provides the remaining USD 99,000.
Example:
EUR-USD is 1.2075 1.2074 1.2077
1.2075 is the 'last' ie price of the last transaction
1.2074 is the "bid" ie sale price of euro with USD
1.2077 is the "ask" ie purchase price of euro with USD
In addition, your broker offers you a leverage of 100 to 1.
You buy the Euro at 1.2077
* Investment lever / ask = amount of the target currency
For 1000 USD so you get 1000 * 100 / 1.2077 = 82 802.02 euro
Later the price rises (as you predicted!)
USD EUR 1.2097 1.2096 1.2098
So you sell at a price of 1.2096 bid
82 * 1.2096 = 802.02 100 157.32 USD
You pay the 99 000 USD lever
You repay your overdraft USD 1000
Your profit is therefore 157.32 USD
التسميات
forex