SYMBIOSIS CENTRE OF

MANAGEMENT STUDIES,
NAGPUR

Assignment on Foreign Exchange

Market

Guided By: Mr Gangu Sir

Submitted By: Mayank Ahuja
 ❖ Meaning And Introduction of Foreign Exchange
Market (FOREX)
The term Foreign exchange implies two things:
a)foreign currency and b) exchange rate
a)Foreign exchange generally refers to foreign currency, eg for India, it is a dollar, euro, yen,
etc…
The other part of foreign exchange is the exchange rate which is the price of one currency in
terms of the other currency.
b)Forex is the international market for the free trade of currencies. Traders place orders to buy
one currency with another currency.

❖ Definition of Foreign Exchange Market:

According to Hartly Withers, “ Foreign exchange is the art and science of international monetary
exchange”.
The forex market is the world’s largest financial market. Over $4 trillion dollars worth of currency
is traded each day. The amount of money traded in a week is bigger than the entire annual GDP
of the United States.
The main currency used for forex trading is the US dollar.

❖ Forex Trading in India – Legal or Illegal

In India, Foreign Exchange or Forex trading is not allowed. If someone is found trading Forex
instruments on the forex market by the Reserve Bank of India’s representatives, he/she is
immediately charged with violation of the law. Hence it is legally a crime to involve in Forex
trading and the charges of the crime are imprisonment in a jail in this country. The offence is
considered immense, the prediction of intensity can be deduced from this fact that it has been
labelled to be non-bailable.

❖ Features of Foreign Exchange Market:

❖ Low trading Cost
❖ Trading Opportunity for 24 hours, 5 Days a week
❖ High Leverage
❖ High Transparent
❖ Accessibility of Forex Market
❖ High Liquidity
❖ Advantages Of Forex Market
❖ It’s already the world’s largest market and it’s still growing quickly
❖ It makes extensive use of information technology – making it available to everyone
❖ Traders can profit from both strong and weak economies.
❖ A trader can place very short-term orders – which are prohibited in some other markets.
❖ Brokerage commissions are very low or non-existent.
❖ The market is open 24 hours a day during weekdays.

❖ Terms Related to Foreign Exchange

❖ Foreign exchange reserves- holdings of other countries' currencies.
❖ Foreign exchange controls- controls imposed by a government on the purchase/sale of
foreign currencies.
❖ Retail foreign exchange platform- speculative trading of foreign exchange by individuals
using electronic trading platforms.
❖ Foreign exchange risk- arises from the change in the price of one currency against
another.
❖ International trade- the exchange of goods and services across national boundaries.
❖ Foreign exchange company- a broker that offers currency exchange and international
payments.
❖ Bureau de change- a business whose customers exchange one currency for another.
❖ Currency pair- the quotation of the relative value of a currency unit against the unit of
another currency in the foreign exchange market.
❖ Digital currency exchanger- market makers which exchange fiat currency for electronic
money.