What is the Forex market in Zambia and risks? Learn more from here including the Brief History of Forex, Why We Can Trade Currencies in Zambia, and advantages and disadvantages of trading forex in Zambia.
What is Foreign Exchange in Zambia?
For a number of purposes, typically for shipping, trade, or tourism, foreign exchange is the process of converting one currency into another currency. The average was more than $5.1 trillion in daily forex trading volume, according to a new triennial study from the Bank for International Settlements (a regional fund for the national central banks).
Currencies are traded on the foreign-exchange market. For most people around the world, currencies are relevant, whether they know it or not, since currencies need to be exchanged to conduct international trade and commerce. When you live in the U.S. and want to buy cheese from France, then you or the company you buy cheese from will have to pay the French in euros (EUR) for the cheese. This means the U.S. importer will have to swap the U.S. dollar (USD) equivalent value into euros. The same applies when traveling. A French visitor in Egypt can’t pay in euros to see the pyramids because it’s not the locally recognized currency. As such the visitor has to swap the euro at the existing exchange rate for the local currency, in this case the Egyptian pound.
One unique aspect of this international market is that there is no central foreign-exchange marketplace. Today, currency trading is carried out electronically over-the-counter ( OTC), meaning all transactions take place through computer networks between traders around the world, rather than on one centralized exchange. The market is open 24 hours a day, five and a half days a week, and currencies are exchanged globally in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong , Singapore, Paris, and Sydney’s main financial centers — nearly in every time zone. This ensures that the forex market starts anew in Tokyo and Hong Kong as the U.S. trading day ends. As such, the forex market can be extremely competitive every time of the day, with demand quotes constantly changing.
What you need to know about the foreign exchange in Zambia
The foreign exchange (also known as the FX or forex) market is a global marketplace where national currencies are traded against each other.
Because of the global scope of commerce, commerce, and finance, forex markets continue to be the world’s biggest and liquidest asset markets.
Currencies compete as exchange-rate pairs, for example, EUR / USD, against each other.
There are Forex markets as spot (cash) markets as well as derivatives markets that sell forward, futures , options, and currency swaps.
Market participants use forex, among many other factors, to protect against foreign currency and interest rate risk, to bet on geopolitical developments, and to diversify portfolios.
Forex Trading Risks in Zambia
Currencies can be dangerous and difficult to trade. There are varying degrees of regulation on the interbank market, and forex instruments are not standardised. Forex trade is virtually totally unregulated in certain parts of the world.
The interbank market consists of banks that transact around the world with each other. The banks themselves have to assess and recognize sovereign risk and credit risk, and internal processes have been developed to keep themselves as safe as possible. Regulations such as this are industry levied on each participating bank for security.
Since the market is generated by each of the participating banks making offers and bids for a particular currency, supply and demand are the basis of the market pricing mechanism. Since there are such massive amounts of exchange within the scheme, rogue traders have trouble manipulating the price of a currency. This program aims to establish market transparency for investors who have access to interbank trading.
Most small retail traders trade with relatively small and semi-unregulated forex brokers / dealers who may (and sometimes do) re-quote prices and even trade their own customers against. There may be some government and business oversight depending on where the dealer resides, but such regulations are inconsistent across the globe.
Most retail investors should spend time researching a forex dealer to see if it is regulated in the U.S. or the U.K. (More regulation for dealers in the U.S. and UK) or in a country with lax laws and supervision. It’s always a good idea to find out what kind of account rights are available in the case of a business crash, or whether a dealer is insolvent.
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