Dictionary Contents : I : Inner Ear

A trader can trade in Forex using a number of strategies when using Fintech LTD. However, the strategies that is available for currency trading fall broadly under two categories, namely speculating and hedging.

How can Forex be used to hedge a portfolio

When goods or services are sold in foreign countries they get paid for in the currency of that country in which the goods are sold. However, currency rates fluctuate which could result in the sale being either overvalued or undervalued in the home currency value. To avoid this loss because of currency fluctuation, companies protect themselves. This is called hedging and they do this by trading the pairs of currencies. The companies do this to protect any currency movement that is adverse and this helps the company to generate revenues.

The traders in the foreign financial market hedge their foreign currency exposure. This is done in order to gain from the investment. So, for example, suppose there is a fund manager who wants to hold on to some stocks that are traded on the Japanese stock exchange. However, he does not want to be exposed to the movement of the Japanese currency, Yen. The fund manager hedges against these movements so he is exposed purely to the stock price movement only. Heis not affected by the movements of the currency.

The currency traded is because of hedging that happens on a daily basis.

Speculating the foreign exchange move

Most of the traders, however, speculate in the foreign exchange market and this means buying and then selling the currency pair in order to make profits from the move. TheForextraders speculate whether the value of a particular currency will move higher or lower to the other currency in the future. The speculators may not just be the individual traders. They could also be fund managers, pension funds, and commercial banks or investment banks.

Currencies are always traded in pairs. So when a given transaction occurs trader wages which currency will rise in value and which will fall. Most of the forex trading occurs in some handful pairs that are very liquid. The trader would have to have an understanding of the characters of both the currencies that are involved as well as what factors would cause movement in the currency pair.

Other strategies to trade Forex

Apart from traders that focus on the value of two currencies, there are also arbitrage traders. Arbitrage traders buy and sell the same security or currency at a slightly different price. This is done in order to make a profit that even though small is risk-free.

Health and Wellness Dictionary: Definition

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Inner Ear
Part of the ear that contains both the organ of hearing (the cochlea) and the organ of balance (the labyrinth).the end

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