Aro Trade
Currency or forex trading is an highly speed intensive and intellectually draining experience. Further traders must constantly update themselves on the countries that constitute the market or read up on various reports prepared by skilled economists or analysts who predict generally correctly where a particular country is headed and what their present position is. Currency or forex trading exchanges currencies either on a daily basis or by taking short or long positions based upon the inputs received by each of the dealers in their respective countries.
This requires some explanation. Assume that x country today has a shortage of dollars because it is importing large amounts of capital equipment or goods and services. This capital equipment will have a gestation period of say six months. Thus after this capital equipment is commissioned and it starts exporting obviously the country is going to get more dollars than it has now. it can take a position with another country that on a particular day in a particular month it will give that other country dollars for a price.
Thats a short position. Increase the period you have a long position. Meanwhile in between if the country which has taken this position undergoes some changes in politics or economics then that would drive down its currency value against a benchmark which is generally the USD so far. However if there is substantial inflow of investment going into a country then that countrys currency shows up a lower value for the dollar. To wit x countrys ratio with the dollar was 35.50 per dollar perked up by foreign investment and parking of dollars in that country today that rate would be 33.00 against the dollar. Thats called appreciation of that countrys currency. if investment is streaming out obviously the dollar would be stronger because more of that countrys currency would be required to purchase one dollar!
In todays free market environment where most countries have liberalised their economies the forex market determines the value of each currency against other currencies that is each country now allows their currency to find its own value instead of having a fixed value as maintained by Governments before. Therefore the foreign exchange market is much higher today and deals with trillions and trillions of dollars to put it mildly.
