Forex Information - Top Ten Basic Terms In Forex Trading And Their Definitions (Part 3)
Forex trading is in essence the investment in the currency of one country. Large international corporations that do business in many nations find value in keeping their cash reserves in a variety of nations, and holding their funds in a variety of ways. For example, a US company may have a percentage of its working capital in US dollars, but if it does quite a bit of business in Europe may also find it beneficial to keep a percentage of its money in Euros, in European banks. Many individual investors over the years have discovered that there is profit to be made in investment and speculation in the currency or forex markets.
As an example, during the 1970’s the German deutchmark was changing rapidly in value. It was worth anywhere from 1.7 marks to the US dollar to 2.5 US marks to the dollar. When the mark was worth 2.5 it was beneficial to spend dollars buying marks, since the mark would buy more goods or services at that rate. When the mark was only worth 1.7 to the dollar there was less incentive.