In this article, we are going to unleash the role of banking business in Forex.
First of all, we need to have adequate answers to the following three core questions.
1 what is a bank and how does it work?
2. What is the central bank?
3. Why do we care about this in Fx reading?
Let’s try to find out.
Modes Operandi of Bank
What sketch do you have in your mind while memorizing the bank?
Firstly it provides us facility for our extra cash storage.
Finally, it provides us lending.
History of Bank at a glance
As far as banking history is concerned. It has a very long history. First prototype banking started back in 2000Bc in the Mesopotamian Empire. The aim was to provide lending to Farmers and Traders.
In the recent history banking business initiated in Italy in the 15&16th century until we see the latest from nowadays.
Forms of Bank
It seems like there are many kinds of banks eg investment bank – saving bank, etc. Collectively called commercial Banking.
Why do we care as Fx trader
Likewise, one thing needs to be understood, being an FX trader that it is one of the biggest sources of leverage. It means circulation more money than its face value like doing “check to clear” through clearinghouse by the central bank. For example, a transaction between 2 parties without physical movement of money.
Even more central banks provide regulatory mechanisms as well.
Commercial Banks with a portfolio of Trading
Nowadays many big joints in the banking industry have their own trading divisions. By law mandatory to show off their assets holding such as Goldman Sachs HSBC Barkley.
Therefore, we have to have a close look at their trading activities for getting benefits as retail traders.
Consequently to summarize this discussion we have now understood what bank is.?
How does it creates fictitious money through leverage and being a trader why do we care for it?
As a result, I hope this video has given a glimpse of the banking business.
I have been Shahzad and you have been marvelous.
Have a Nice trading journey.