Foreign Exchange Markets

London, New York, Tokyo, and Singapore are the world’s major foreign exchange markets in the world. Having different countries as part of the major foreign exchange market it allows money to go around the world. It is clear that a nation’s currency must be accepted by international banks, and business in order for any nation to be part in international commerce and exchange.
To have a better understanding it is said that foreign exchange market is the market where currencies are trade. This is considered the world’s largest market because in consist of approximately a trillion in daily volume. This is also the most liquid, differentiating from other markets. The foreign exchange market does not have a central location to conduct business; this is conducted over the counter. Not having a central location allows traders to select from the various dealers to make their trades; in addition, it allows traders to compare prices.   When a trader deals with a large dealer he or she has an advantage because in must cases large dealers have access to pricing at the largest banks in the world.
When talking about foreign exchange market it is necessary to say that this involves buying one currency and selling another currency, and this happens simultaneously. This type of exchange is done because the value of the one currency is determined when comparing it to another currency. When comparing the first currency is called base currency and the second currency is called counter currency. The currencies are named this way because it shows how much of the counter currency it’s required to purchase one unit of the base currency.
Regarding the purchase of a currency pair the way it’s done the base currency is bought while the counter currency is sold, it is also said that when a currency pair is sale the opposite happens. There are four major currency pairs; these are EUR/USD (Euro/US Dollar), USD/JPY (US Dollar/Japanese Yen), GBP/USD (Pound Sterling/US Dollar), and USD/CHF...