What is Forex: Understanding Forex, Functions, and Doers In The Forex Market

What is forex? For most of us may not know much about the meaning of the word. Forex in general can be interpreted as a form of buying and selling one country's currency against the currencies of other countries. Interestingly, today's forex has become a very promising business field.

For those of you who want to know more about forex, this article will provide a review of the understanding, function, and forex world players who hopefully can be additional useful information for you.

Understanding Forex

Forex is basically a combination of 2 words in English that is "foreign" and "exchange". Foreign can mean "foreign" or "foreign" while Exchange can be interpreted as "exchange", in this case is meant is the exchange of currency. And when combined, forex or foreign exchange can be interpreted as a foreign exchange activities.

In one of the Wikipedia pages explain that forex in the Indonesian language is also known by some terms that is Forex Market or Foreign Currency. Both terms have the same meaning that is a trading activity that involves two currencies from different countries as the object of the trade. Deeper in the process of buying and selling the currency there is a role of the major money markets that exist around the world and last for 24 hours a day in sequence.

In turn, globally forex or forex market will start from New Zealand and Australia which happened at 05.00-14.00 WIB. The rotation will then move west towards the Asian market which took place at 7:00 to 16:00 WIB, the next European market at 13:00 to 22:00 WIB, and the last is the American market at 20:30 to 10:30 WIB. After the American market is over, the turnaround will return to New Zealand and Australia markets, and so on.

The Function of the Forex Market

In the process, forex has several major functions that are very influential to the perpetrators. The function of forex is divided into 3 as follows:

# 1. The first function is to simplify the process of currency exchange. As we know, in the daily economic activities of human beings sometimes require funds in the form of currency of other countries. Whether it's used in business, travel, shopping or storage.

The currency exchange can be done with a system called Clearing. Well one of the functions of the forex itself is to provide such services. For simplicity, examples of such services are foreign exchange services that you usually meet in various places, ranging from banks to exchange of money in various places.

# 2. The second function is to do Hedging. Hedging in Indonesian is also called hedging. This is an act that is usually done by a forex trader as a "guarantee" that the value of investment funds is not reduced or loss when he sells forex in 2 different markets. In this case also play the banks, both domestic banks and foreign banks as US guarantor funds.

# 3. The third function is to do the Arbitration. Arbitrage is basically the difference in interest rates of 2 different currencies. And arbitration is an act done to benefit from the difference in the currency itself. This is simply done by buying a currency that is low in value in a country, and selling the currency in a country where the currency is high.

Performers In The Forex Market

In the forex market there are certainly some parties involved and give influence in it or the term as a player in the market. Forex market players can be divided into 6 as follows:

1. Bank

Banks play an important role in the forex market. In this case known the term Money Market Inter bank (PUAB). PUAB itself plays a role to meet almost all the needs of the sale and purchase as well as currency rotation in the field of global business. In performing its functions sometimes the bank will make the process of buying and selling currency on behalf of its customers. But in large quantities, then the transaction will be done on behalf of the bank itself.

PUAB itself is also used by forex brokers to benefit in bringing together forex sellers and forex buyers directly. From there forex brokers can benefit not a bit. But now, the system used by PUAB has been developed with electronic system more effective and efficient.

2. Business Needs

The second forex market is the needs of the company or business actor when making payments using foreign currency. Basically a business sometimes requires funds in the form of foreign currency when making transactions, but in fact the direct influence is not too felt on the state of a currency.

It will be different results when discussing a large corporation. Here large corporations have a large and unexpected share if they engage in massive foreign exchange moves. When they let go, the market or the speculators could not expect it directly. As a result, the value of a currency can move up or down.

3. Central Bank

The Central Bank in this case has the role of controlling the supply of money, the occurrence of inflation and also associated with interest rates. With its very important role, the Central Bank could easily influence the development of the forex market.

One of the advantages of a nation's Central Bank is simply to make interventions alone is enough to create turmoil on the state of the forex market or foreign exchange. This is due to concerns with the actions of the Central Bank that can raise or lower interest rates. So a little more sustainability of the currency market is determined by the movement of the Central Bank in the country.

4. Investment Management Company

Generally Investment Management Companies that play in the forex market does not make this effort as the main source of income especially as a step of speculation. The company is a body that regularly manages some funds such as pension funds or donation funds from the foundation. All the funds they use on the forex market sometimes just "play" to get additional revenue for the company.

5. Hedge funds

Next is Hedge funds. Hedge funds is a company that does play in the forex market as a speculator. The funds they release are actually maximized capital in the forex market, there is no other reason for them except to get a big profit from the activity.

What is surprising is that Hedge funds have the ability to grow large and even have the ability to influence the value of the currency better than the Central Bank. If that happens it will be very difficult for the currency to move well because it is under the control of a corporation oriented to profit.

6. Forex Brokers / Brokers

The latter is a forex broker. Until now, forex brokers are still the most profitable from the forex market. Basically forex brokers can be individuals, groups or companies that have a job to bring together customers / buyers with foreign currency sellers.

The existence of forex brokers are very helpful for forex business or commonly referred to as forex trading. But not infrequently also, forex brokerage firms are not responsible false alias even become the most disadvantageous parties, especially for new players in the forex business.

The following above is a review of what the forex, function, and the players in the forex market. Hopefully it can be a useful additional knowledge.