First things first, we have to understand the meaning of Forex and other integral parts of the word. Forex is actually short for Foreign Exchange. This essentially deals with the exchange of currencies but to further elaborate, we will be discussing Foreign Exchange Market, Foreign Exchange Trade and Foreign Exchange Brokers.
Foreign Exchange Market also called Forex Market is basically a decentralized, global, over the counter (OTC) Market or platform which allows individual investors, firm or corporation, retailers and banks to trade in foreign currencies which in essence determines the exchange rate for each currency all across the world. It can also be viewed as a platform which involves all aspect of exchanging, buying and selling currencies at current or determined prices.
Since we have established the meaning of a Forex Market, you can easily tell what a Foreign Exchange Trading means however, we will highlight it as well. Forex Trading simply means the activity of buying, selling and exchanging currencies at a determined rate. These currencies are traded in pairs in spots and futures markets. Individual investors, Banks, corporations, and traders have several reasons for trading in the Foreign Exchange Market. Now, besides the obvious which is to make profit, some other reasons include facilitating international trade and tourism, balancing the forex market, etc. It should be noted that though, Forex trading has its perks it comes with risks due to the fact that the value of currency pair is controlled by political, economic and environmental factors which may include national elections, natural disasters, wars, etc. It is quite advisable to be well versed in the market policies before you begin to trade in the Forex Market.
Forex Brokers also known as Foreign Exchange Brokers are intermediaries that facilitate trade by providing clients access to their 24-hour interbank market (an online channel through which currency trading is done throughout the whole working days in a week, 24-hours daily) in order to conduct trades on the forex market. It should be noted that there are two institutions responsible for facilitating and regulating the Foreign exchange market in the United States, they are Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA) and all Forex Brokers in the US must be registered under either one of these institutions.
Some of the most popular Foreign exchange Brokers in the United States include FOREX.com, ATC Brokers, OANDA, TD Ameritrade, Interactive Brokers, Ally Invest, thinkorswims. All these are registered under NFA which also offers an online verification system called Background Affiliation Status Information Centre (BASIC) where foreign exchange Brokers get verified for having necessary compliance and approval. However, one point to note is that the Securities Exchange Commission (SEC) has no authority over the forex market because it doesn’t consider currency pairs security.