Forex Transactional Dealings
Posted by Daytrader on July 15, 2009 under Uncategorized | 
Be the First to Comment
Forex trading transactional dealings of a bank with its customer is called as merchant business and the rate of exchange at which the transaction takes place is the rate of merchant. The merchant business in which the contract with the customer to buy or sell Forex trading is agreed to and executed on the same day is called as ready or cash transactions. As in the case of transactions of interbank, a value next day contract is deliverable on the next business following the date of the contract. Most of the transactions with customers are on ready basis. The terms spot and ready are utilized synonymously to refer to transactions concluded as well as executed on the same day. At first, the concept of transactions of exchange that was discussed under trading Forex markets is repeated here in the perspective of merchant transactions to reorient as well as reinforce the learning.
Trading Forex dealing is a business in which foreign currency is the commodity. Trading online was seen earlier that foreign currency is not a legal tender. The United States dollar cannot be used for settlement of debts, nevertheless, it has value. The value of United States dollar is like the value of any other commodity. Therefore, the foreign currency can be considered as the commodity in Forex trading dealings.
Any trading online has two aspects are purchase and sale. A buyer has to buy goods from his dealers which he sells to his customers. Similarly, the bank that is approved to deal in real trading online sells as well as purchases its commodity. The points need to be constantly kept in mind while talking of a real trading online transaction. The business deal is always talked of from the bank’s point of view and the item termed to is the foreign currency. Therefore, we can say a purchase, we imply that the bank has purchased and it has purchased foreign currency. Similarly, when we say a sale, we imply that the bank has sold and it has old foreign currency.
We have seen that the rates of exchange can be quoted in either of the two ways. They are direct quotation and indirect quotation. The quotation in which rate of exchange is expressed as the price per unit of foreign currency in terms of the home currency is called as home currency quotation or direct quotation. The quotation in which the unit of home currency is kept stable and the rate of exchange is expressed as so many units of forex currency is called as foreign currency quotation or indirect quotation.
Therefore, when the bank buys Forex online from the customer, it expects to sell the same in the market of interbank at a better rate and this make a profit out of the deal. Thus, the interbank buying rate forms the bass for quotation of buying rate by the bank to its customer. Similarly, when the bank sells Forex online to the customer, it meets the commitment by purchasing the required foreign exchange from the interbank market. It can acquire foreign exchange from the market at the market selling rate.