Forex

Forex is short for foreign exchange and broadly refers to all transactions involving foreign currencies. The term forex is can also be used to refer to the foreign currencies themselves. Forex trade involves entities like governments, corporations, individuals and banks.

Individuals mostly get involved in forex transactions through international remitances. In this case an individual living one country, say a foreign country sends money, in the form of official currency of the country he is operating from to other people living in another country, say his home country. The money he has send is treated as forex in the country he is sending it to, this time his home country. Forex transactions involving individuals constitute quite a sizeable part of the forex market, and are a significant part of some countries' economies, especially those that are major exporters of labour.

Governments are other major participants in the forex trade. Actually every government has to find ways of generating some forex for essential imports, even if it is by borrowing. Governments also take part in the forex trade as facilitators and regulators. As facilitators and regulators governments provide the legal framework within which the forex trade takes place. In some countries, forex trade is a strictly government controlled enterprise, and dealing with any forex without government authorization is a serious crime. The number of such case is however getting smaller with increased liberalization and globalization.

Transactions involving corporations form the biggest chunk of the forex trade market. Corporations take part in forex trade mainly as importers and exporters. There are also some corporations that specialize wholly in forex trade, mainly as facilitators. These include the forex bureau to be found in many cities and the increasingly popular online forex trading corporations.

Banks are the other major participants in the forex trade. Actually, every forex transaction has to involve a bank at some point. Therefore banks get involved in the forex trade as the main facilitators. Banks are also major traders in forex, and forex trade constitutes a big part of most bank's profits. In this case, the banks buy forex from their clients (who need the local or other currencies) at a lower rate and sell to other clients who need the forex, say importers, at a higher rate, hence making a neat profit.