1. Static concept
The static concept of forex is defined as a mean of payment expressed
in foreign currencies, which is a tool for international settlement.
Such payment instruments include credit derivatives and securities
expressed in foreign currencies, such as bank deposits, commercial
drafts, bank drafts, bank checks, long and short-term government
securities, etc.
2. Dynamic concept
The dynamic concept of forex refers to a specialized business
activity, in which a country‘s currency pair is exchanged for another
country’s currency in order to settle international claims and debts. It
is an abbreviation for International Exchange.
Here, it is important to address that the currency of some countries
cannot be freely exchanged in the international market, so it is
regarded as foreign currency rather than foreign exchange. There are
many traders who always mistake foreign currency and foreign exchange.
This leads to the misunderstanding in national economy data releasing.
The exchange rate is known as the price of one country's currency
expressed in another country's currency or the ratio between the
currencies of the two countries. For example, USD/ZAR=1/15.4234, the
exchange ratio of USD to ZAR is 1:15.4234. It can be expressed that
people can purchase 15.4234 ZAR for 1 USD.
What are the ways to engaging in forex?
1. Bank. At present, many banks can handle personal foreign exchange
settlement, forex settlement of trading companies, and forex purchases
for overseas travel expenses. Purchasing foreign currencies in a bank is
the most common way in our daily life.
2. Platforms or brokers. Individuals or institutions that invest in
the forex market can trade forex on the platforms. At present, there are
numerous domestic companies developing open foreign exchange margin
trading business in South Africa. If you want to conduct foreign
exchange margin trading, you can find a broker to open a trading
account.
Who are the market participants?
Participants in the forex market include central banks, commercial
banks, non-bank financial institutions, broker companies, self-employed
businesses, and large multinational corporations in various countries.
They have frequent transactions and huge transaction amounts, and each
order is counted in millions of dollars or even more than ten million
dollars. Generally speaking, there are three motivations for their
participation:
1, International companies convert foreign profits into their national currency.
2, Hedging, corporate finance ministers, and fund managers will also
use the forex market to reduce the risk of price fluctuations in futures
transactions.
3, Speculators
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