24-Hour Market
The FOREX market is a seamless 24-hour market. With the ability to trade during the U.S., Asian, and European market hours, traders have the advantage of customizing their own trading schedule.
Liquidity
FOREX market operates huge volume of money which provides the traders with complete freedom to open or close their positions, regardless of size.
Leverage
It decreases requirements to the size of the initial deposit. For instance, if you deposit $ 10,000 (USD) into your account, you will have an opportunity to trade $2,000,000 (USD) using leverage 200:1.
Easy Access
With the development of Internet this sector of the financial markets becomes easily accessible and attractive for the investors of different levels.
Commission Free Trading
FIBO-FOREX.LT charges no commission or additional transactions fees to trade currencies online or over the phone. Combined with the tight, consistent, and fully transparent spread, FOREX trading costs are lower than those of any other market. FIBO-FOREX.LT is compensated for its services through the bid-ask spread.
Instantaneous Execution of Market Orders
On the FIBO-FOREX.LT Trading Platform, traders execute directly off real time streaming prices. There is no discrepancy between the displayed price shown on the platform and the execution price to enter your trade.
Short-Selling
Unlike the equity market, there is no restriction on short selling in the currency market. Trading opportunities exist in the currency market regardless of whether a trader is long or short, or which way the market is moving. Since currency trading always involves buying one currency and selling another, there is no bias to the market. Hence, a trader has an equal access to trade in a rising or falling market.
Diversification
Portfolios composed of equity and fixed income instruments lack sufficient diversification. Investing in FOREX reduces portfolio risk and enhances returns.
Import/Export
Importers and Exporters can exploit foreign exchange rates and lock in higher profits by making well-timed transactions.
Hedge Foreign Currency RisksProtect your revenues from foreign currency transactions by hedging against exposure to adverse rate movements.
Saturday, September 29, 2007
Sunday, September 23, 2007
tips for forex geginner
The following information is for the forex beginner, but even intermediate-level forex traders might pick up a tip or two from these sites:
Baby Pips: A pip is the smallest unit of price for any foreign currency, so "baby pips" is a bit redundant. But you won't find any redunancy on this site. Skip the news on the front page for now and go straight to the School of Pipsology that holds a complete course for beginners. If you walk through all the lessons contained on this site, you'll have a solid basic forex education under your belt.
Forex Glossary: Although the previous tutorial might help you to understand some forex terms, this glossary is a great tool to have on hand for future reference. You'll see some familiar terms here, like "selling short" and "limit order," and you'll learn that they mean the same as they do when you use them for trading securities. But, you'll also find new terms like "big figure" and "two-way price," terms that will set you apart as a forex trader.
Investopedia: This online financial encyclopedia contains an extensive 10-part article on forex investing, from an introduction to a recap that covers everything from benefits and risks to technical analysis. If you can't get enough of Investopedia's information, head to their Forex index, where you can find a list of articles and an opportunity to download their free e-Book entitled, "High Probability Trading Setups for the Currency Market."
National Futures Association (NFA): Now that you have a basic understanding about forex markets, visit the NFA to learn how to build a sound forex strategy. The NFA is "the premier independent provider of efficient and innovative regulatory programs that safeguard the integrity of the derivatives markets," which basically means that this organization regulates any market that depends upon future cash flows. The "investor information" section contains materials about how to find a broker and basic lessons in forex trading. Plus, they publish forex warnings, news, and they offer a place for investor disputes and complaints.
Commodities Futures Trading Commission (CFTC): The CFTC operates along the same lines as the SEC (Securities and Exchange Commission), except this government organization focuses on protecting market users and the public from fraud in the futures and option markets. So keep this site handy to stay on top of any forex scams through their Consumer Advisory on Forex Fraud. You can learn quickly what to avoid in your learning curve through a detailed forex advisory that offers information about other resources as well.
Martket Traders Insitute (MTI): You don't need to spend a lot of money to train in forex markets. Even MTI offers free resources such as videos and lesson plans that will help you get off the ground. If you like what you hear and see, you can invest in materials for the advanced trader down the road.
Baby Pips: A pip is the smallest unit of price for any foreign currency, so "baby pips" is a bit redundant. But you won't find any redunancy on this site. Skip the news on the front page for now and go straight to the School of Pipsology that holds a complete course for beginners. If you walk through all the lessons contained on this site, you'll have a solid basic forex education under your belt.
Forex Glossary: Although the previous tutorial might help you to understand some forex terms, this glossary is a great tool to have on hand for future reference. You'll see some familiar terms here, like "selling short" and "limit order," and you'll learn that they mean the same as they do when you use them for trading securities. But, you'll also find new terms like "big figure" and "two-way price," terms that will set you apart as a forex trader.
Investopedia: This online financial encyclopedia contains an extensive 10-part article on forex investing, from an introduction to a recap that covers everything from benefits and risks to technical analysis. If you can't get enough of Investopedia's information, head to their Forex index, where you can find a list of articles and an opportunity to download their free e-Book entitled, "High Probability Trading Setups for the Currency Market."
National Futures Association (NFA): Now that you have a basic understanding about forex markets, visit the NFA to learn how to build a sound forex strategy. The NFA is "the premier independent provider of efficient and innovative regulatory programs that safeguard the integrity of the derivatives markets," which basically means that this organization regulates any market that depends upon future cash flows. The "investor information" section contains materials about how to find a broker and basic lessons in forex trading. Plus, they publish forex warnings, news, and they offer a place for investor disputes and complaints.
Commodities Futures Trading Commission (CFTC): The CFTC operates along the same lines as the SEC (Securities and Exchange Commission), except this government organization focuses on protecting market users and the public from fraud in the futures and option markets. So keep this site handy to stay on top of any forex scams through their Consumer Advisory on Forex Fraud. You can learn quickly what to avoid in your learning curve through a detailed forex advisory that offers information about other resources as well.
Martket Traders Insitute (MTI): You don't need to spend a lot of money to train in forex markets. Even MTI offers free resources such as videos and lesson plans that will help you get off the ground. If you like what you hear and see, you can invest in materials for the advanced trader down the road.
Friday, September 21, 2007
secrest behind forex trading
Many think that analyzing forex is hard and filled with mathematical concepts and many is willing to pay millions for market courses so they understand the technical analysis with graphics and so on. But we are confused by ourselves which frame will we choose, single minute, five minutes or daily.
If we think logically, clear, and ease we will see signals that actually exist but we can't see because there's indicators blur it. KISS = keep it simple stupid, is basic to be implemented everywhere.
To be successful in trading there's some principals to follow. When you're trading then you'll have to think as a trader, buy at low price and sell at high price is the number one rule. Whether you're playing stocks, commodities, or forex keep the basic traders' principals.
Trading forex lasts for 24 hours. If we're in Indonesia, the Australian market starts at 04:00 early in the morning, then the Japanese market at 14:30. Starts next is European market at 20:30 and the last one to open is the American market which will close at 04:30 the next morning.
Based on experience, time is very important to the outcome of the trade whether we will win or lose. Mostly the price is going steadily from the morning till afternoon Indonesia time. The ups and downs of the price start when the European market opens. Then when the American market sessions are open, we have a very good chance to gain big profits in short time only if we can position ourselves in a good position.
The way to determine the buy and sell position. Looking at the daily phenomena it is better for us to trade at American time. The first step is to count the price range (high and low) from currency pairs that day. There are four commons currency traded:
EUR/USD Daily range average : 110-120 points
GBP/USD Daily range average : 180-200 points
USD/CHF Daily range average : 120-130 points
USD/JPY Daily range average : 80-90 points
The numbers above is not fixed but at least when we enter the market we know that we're in the right position. Eventhough this won't guarantee a 100% win.
If we look at closely there's a certain pattern from those four pairs of currency that is Euro/USD and GBP/USD walks the line together and 180 degree from USD/JPY and USD/CHF. If Euro/USD and GBP/USD is going high than the USD/JPY and USD/CHF is going the other way, vice versa.
But things don't always go this way. There's a moment where a currency is on his own and the other at the usual pattern. If this happens than the curruency that is has a stable movement is on its lowest or at its top and the currency has a mature daily range (close to the currency's average daily range).
There's no certain rule that says a pair of currency is easier to trade than the other, every currency have their own chances, and it is better for us to adjust to our margin that we have. The Euro/USD and USD/JPY movement is far more stable at range of 100 points and this make the currency safer to be traded with the smallest of our margin compare to GBP/USD and USD/CHF which range in the 200 points.
From the phenomena above a conclusion can be taken, that money is traded by top-class speculators like George Soros only on four world main currency. This is to balance the daily volume and price so at the closing stage the currency will be at their average range of high and low.
The price movement can actually be determined by the movement of each currency pairs. Analysis approach fundamentally with watching close the news is reflected from the price movement. We can read schedule of economic news just to watch it for hours and only waiting for certain news. Close to those times there are possibilities of extreme price changes.
Knowing when ther's going to be an extreme price movement we can at least save times and we don't need a whole day to watch the price movements in the monitors, except it is a hobby and doesn't bother you that much.
In trading it is better if we adjust to the condition of the field that day. It is too risky if we try to predict that the price will be bullis or bearish at certain price level. Then we have to wait for the perfect moment to enter the market that is when the chance has come. The main key is to stay close to our trades.
Trading must be discipline, disciplne following systems and patterns that we have already set. Greed can cause a very fatal condition. Many failures started only by the simplest of mistakes. Miscalculations happened, and if those happens then we have to cut-loss or else we will beburden. Then think positive that there's always better times tomorrow.
You can enter without having to know graphics and charts. The basic in decision making is the highest and the lowest price range everyday. If the price moves to the highest price that day, wait, because the price will try to get through the highest price that day. Just look at the daily range. For Euro/USD, the daily range is 98 points when we enter the market, there's a possibility that it might pass 98 points that day then the price will decline again because there will be profit taking action.
If you are risk taker, you can make profit when there's a price correction and actually you will get two gains at a time that is when the price goes up for a moment for then goes for reversal. This can be done but beginners are adviced not to do this and everyone who hasn't a good experience about the market. You could try at the virtual forex first to understand the situation.
Don't forget to pay attention to the currency that is opposite to the one you are trading. Example in this case you hold Euro/USD, you have to pay attention to opposite currency such as USD/JPY. Because at the same time USD/JPY will try to touch the lowest point before at the end go for reversal.
With the usage of graphics, we can get very good informations. It is also better if we use some softwares for trading we could only watch the time frame for 5-15 minutes. The indicator that is used is Bollinger band and if you're not pretty sure you can add RSI indicator with 6 as it setting period. But back to basic, the important thing is the daily range of highs and lows. If there is break high and break low, you then go watch the candlestick and focus on the five-minute frame.
Many are trapped focusing on the graphics like the Ma lines has crossed or it hasn't and many more. Actually at this time, price range hasn't become mature yet, and of course makes things risky. Once again it is necessary to look at the mature price range.
The usage of pivot, support, and resistant point can also sharpen your decision. But once again the price range is all matter for decision making and you shouldn't be doubtful because of any other indicators. For example Euro/USD has gone through break high. Look at the five-minute chart than the candlestick will touch the upper bollinger band or even more. You can wait a bit more so it can get to the very top, then when you feel there's a reversal you can do your entry.
Price movement is very complex that affect four world main currency one another. This can't be explained in detail. Overbought and oversold aren't basically call upon the five-minute or the fifteen-minute frame. This signal will come to you as you practice, use your logic and amazing things will happen.
Trading is not a exact science so don't waste your money for courses that will guarantee your success.
The main key is practice. There are many source of informations such as newspapers, internet, and mailing lists. Tricks above doesn't promise you a profit but at least if you implement the logic you will the be on the right track. You will have the basic of decision-making.
If we think logically, clear, and ease we will see signals that actually exist but we can't see because there's indicators blur it. KISS = keep it simple stupid, is basic to be implemented everywhere.
To be successful in trading there's some principals to follow. When you're trading then you'll have to think as a trader, buy at low price and sell at high price is the number one rule. Whether you're playing stocks, commodities, or forex keep the basic traders' principals.
Trading forex lasts for 24 hours. If we're in Indonesia, the Australian market starts at 04:00 early in the morning, then the Japanese market at 14:30. Starts next is European market at 20:30 and the last one to open is the American market which will close at 04:30 the next morning.
Based on experience, time is very important to the outcome of the trade whether we will win or lose. Mostly the price is going steadily from the morning till afternoon Indonesia time. The ups and downs of the price start when the European market opens. Then when the American market sessions are open, we have a very good chance to gain big profits in short time only if we can position ourselves in a good position.
The way to determine the buy and sell position. Looking at the daily phenomena it is better for us to trade at American time. The first step is to count the price range (high and low) from currency pairs that day. There are four commons currency traded:
EUR/USD Daily range average : 110-120 points
GBP/USD Daily range average : 180-200 points
USD/CHF Daily range average : 120-130 points
USD/JPY Daily range average : 80-90 points
The numbers above is not fixed but at least when we enter the market we know that we're in the right position. Eventhough this won't guarantee a 100% win.
If we look at closely there's a certain pattern from those four pairs of currency that is Euro/USD and GBP/USD walks the line together and 180 degree from USD/JPY and USD/CHF. If Euro/USD and GBP/USD is going high than the USD/JPY and USD/CHF is going the other way, vice versa.
But things don't always go this way. There's a moment where a currency is on his own and the other at the usual pattern. If this happens than the curruency that is has a stable movement is on its lowest or at its top and the currency has a mature daily range (close to the currency's average daily range).
There's no certain rule that says a pair of currency is easier to trade than the other, every currency have their own chances, and it is better for us to adjust to our margin that we have. The Euro/USD and USD/JPY movement is far more stable at range of 100 points and this make the currency safer to be traded with the smallest of our margin compare to GBP/USD and USD/CHF which range in the 200 points.
From the phenomena above a conclusion can be taken, that money is traded by top-class speculators like George Soros only on four world main currency. This is to balance the daily volume and price so at the closing stage the currency will be at their average range of high and low.
The price movement can actually be determined by the movement of each currency pairs. Analysis approach fundamentally with watching close the news is reflected from the price movement. We can read schedule of economic news just to watch it for hours and only waiting for certain news. Close to those times there are possibilities of extreme price changes.
Knowing when ther's going to be an extreme price movement we can at least save times and we don't need a whole day to watch the price movements in the monitors, except it is a hobby and doesn't bother you that much.
In trading it is better if we adjust to the condition of the field that day. It is too risky if we try to predict that the price will be bullis or bearish at certain price level. Then we have to wait for the perfect moment to enter the market that is when the chance has come. The main key is to stay close to our trades.
Trading must be discipline, disciplne following systems and patterns that we have already set. Greed can cause a very fatal condition. Many failures started only by the simplest of mistakes. Miscalculations happened, and if those happens then we have to cut-loss or else we will beburden. Then think positive that there's always better times tomorrow.
You can enter without having to know graphics and charts. The basic in decision making is the highest and the lowest price range everyday. If the price moves to the highest price that day, wait, because the price will try to get through the highest price that day. Just look at the daily range. For Euro/USD, the daily range is 98 points when we enter the market, there's a possibility that it might pass 98 points that day then the price will decline again because there will be profit taking action.
If you are risk taker, you can make profit when there's a price correction and actually you will get two gains at a time that is when the price goes up for a moment for then goes for reversal. This can be done but beginners are adviced not to do this and everyone who hasn't a good experience about the market. You could try at the virtual forex first to understand the situation.
Don't forget to pay attention to the currency that is opposite to the one you are trading. Example in this case you hold Euro/USD, you have to pay attention to opposite currency such as USD/JPY. Because at the same time USD/JPY will try to touch the lowest point before at the end go for reversal.
With the usage of graphics, we can get very good informations. It is also better if we use some softwares for trading we could only watch the time frame for 5-15 minutes. The indicator that is used is Bollinger band and if you're not pretty sure you can add RSI indicator with 6 as it setting period. But back to basic, the important thing is the daily range of highs and lows. If there is break high and break low, you then go watch the candlestick and focus on the five-minute frame.
Many are trapped focusing on the graphics like the Ma lines has crossed or it hasn't and many more. Actually at this time, price range hasn't become mature yet, and of course makes things risky. Once again it is necessary to look at the mature price range.
The usage of pivot, support, and resistant point can also sharpen your decision. But once again the price range is all matter for decision making and you shouldn't be doubtful because of any other indicators. For example Euro/USD has gone through break high. Look at the five-minute chart than the candlestick will touch the upper bollinger band or even more. You can wait a bit more so it can get to the very top, then when you feel there's a reversal you can do your entry.
Price movement is very complex that affect four world main currency one another. This can't be explained in detail. Overbought and oversold aren't basically call upon the five-minute or the fifteen-minute frame. This signal will come to you as you practice, use your logic and amazing things will happen.
Trading is not a exact science so don't waste your money for courses that will guarantee your success.
The main key is practice. There are many source of informations such as newspapers, internet, and mailing lists. Tricks above doesn't promise you a profit but at least if you implement the logic you will the be on the right track. You will have the basic of decision-making.
Thursday, September 20, 2007
basics of forex
Forex Market
Trading information for beginners
If you’re a new to the forex (foreign exchange) market, you probably have a lot of questions. Making money in a global currency market is an exciting prospect; you’re probably wondering how, and what you need to get started. A lot of information on the internet is geared toward the knowledgeable trader who has at least experienced the stock market. Not everyone has the benefit of Wall Street experience. We are here to help you out if you’re not all that stock savvy and don’t have a financial background.
So, what is foreign currency exchange?
The basic term, foreign currency exchange, is used to explain the exchange of one country’s currency for another’s. If you’ve every traveled out of the country, you probably cashed in your American dollars to find that the trade was nowhere near equal. Forex is the same thing on a much larger scale – it’s similar to the market except it deals in liquid assets at all times. It’s the process of buying and selling cash from nations around the world.
How can foreign currencies be traded?
Currency exchanges can be handled on three different levels. You will need to use a broker or a brokerage firm that allows trades through one of the following:
• The Commodity Futures Trading Commission (CFTC) • Securities and Exchange Commission (SEC)
There is also what is called the off-exchange (over-the-counter) market. An example of this would be that you return from your vacation from Canada and trade your cash in for American dollars. This is only on a retail level or corporate level. Off-exchange trading is subject to very limited regulatory oversight.
How much money do I need to trade Forex?
It depends on the Forex dealer. Brokers concentrated in the Forex market can set their own minimum accounts and are allowed to set their own fees and rate schedules. You’ll need to ask your dealer how much money it’s going to cost you initially.
Many dealers will require a security deposit (a “margin”) to cover future transaction fees. When you choose a broker, make sure that you look over the fees and schedules carefully before you deposit any money. It is important to understand your broker’s capabilities, as well, before handling any transactions through their firm.
These are just a few basic facts about the Forex market to get you started. Trading foreign currencies can be an exhilarating experience when you’ve begun making money, but it is important to get an education before you start out. This website has a wealth of information for the new Forex trader, including tips and strategies. It is highly encouraged that you read up to explore the possibilities of trading in a worldwide environment
Trading information for beginners
If you’re a new to the forex (foreign exchange) market, you probably have a lot of questions. Making money in a global currency market is an exciting prospect; you’re probably wondering how, and what you need to get started. A lot of information on the internet is geared toward the knowledgeable trader who has at least experienced the stock market. Not everyone has the benefit of Wall Street experience. We are here to help you out if you’re not all that stock savvy and don’t have a financial background.
So, what is foreign currency exchange?
The basic term, foreign currency exchange, is used to explain the exchange of one country’s currency for another’s. If you’ve every traveled out of the country, you probably cashed in your American dollars to find that the trade was nowhere near equal. Forex is the same thing on a much larger scale – it’s similar to the market except it deals in liquid assets at all times. It’s the process of buying and selling cash from nations around the world.
How can foreign currencies be traded?
Currency exchanges can be handled on three different levels. You will need to use a broker or a brokerage firm that allows trades through one of the following:
• The Commodity Futures Trading Commission (CFTC) • Securities and Exchange Commission (SEC)
There is also what is called the off-exchange (over-the-counter) market. An example of this would be that you return from your vacation from Canada and trade your cash in for American dollars. This is only on a retail level or corporate level. Off-exchange trading is subject to very limited regulatory oversight.
How much money do I need to trade Forex?
It depends on the Forex dealer. Brokers concentrated in the Forex market can set their own minimum accounts and are allowed to set their own fees and rate schedules. You’ll need to ask your dealer how much money it’s going to cost you initially.
Many dealers will require a security deposit (a “margin”) to cover future transaction fees. When you choose a broker, make sure that you look over the fees and schedules carefully before you deposit any money. It is important to understand your broker’s capabilities, as well, before handling any transactions through their firm.
These are just a few basic facts about the Forex market to get you started. Trading foreign currencies can be an exhilarating experience when you’ve begun making money, but it is important to get an education before you start out. This website has a wealth of information for the new Forex trader, including tips and strategies. It is highly encouraged that you read up to explore the possibilities of trading in a worldwide environment
Monday, September 17, 2007
Factors affecting currency trading
Although exchange rates are affected by many factors, in the end, currency prices are a result of supply and demand forces. The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses (and distills) as much of what is going on in the world at any given time as foreign exchange.
Supply and demand for any given currency, and thus its value, are not influenced by any single element, but rather by several. These elements generally fall into three categories: economic factors, political conditions and market psychology.
Economic factors
These include economic policy, disseminated by government agencies and central banks, economic conditions, generally revealed through economic reports, and other economic indicators.
Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government's central bank influences the supply and "cost" of money, which is reflected by the level of interest rates).
Economic conditions include:
Government budget deficits or surpluses: The market usually reacts negatively to widening government budget deficits, and positively to narrowing budget deficits. The impact is reflected in the value of a country's currency.
Balance of trade levels and trends: The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.
Inflation levels and trends: Typically, a currency will lose value if there is a high level of inflation in the country or if inflation levels are perceived to be rising. This is because inflation erodes purchasing power, thus demand, for that particular currency.
Economic growth and health: Reports such as gross domestic product (GDP), employment levels, retail sales, capacity utilization and others, detail the levels of a country's economic growth and health. Generally, the more healthy and robust a country's economy, the better its currency will perform, and the more demand for it there will be.
Although exchange rates are affected by many factors, in the end, currency prices are a result of supply and demand forces. The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses (and distills) as much of what is going on in the world at any given time as foreign exchange.
Supply and demand for any given currency, and thus its value, are not influenced by any single element, but rather by several. These elements generally fall into three categories: economic factors, political conditions and market psychology.
Economic factors
These include economic policy, disseminated by government agencies and central banks, economic conditions, generally revealed through economic reports, and other economic indicators.
Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government's central bank influences the supply and "cost" of money, which is reflected by the level of interest rates).
Economic conditions include:
Government budget deficits or surpluses: The market usually reacts negatively to widening government budget deficits, and positively to narrowing budget deficits. The impact is reflected in the value of a country's currency.
Balance of trade levels and trends: The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.
Inflation levels and trends: Typically, a currency will lose value if there is a high level of inflation in the country or if inflation levels are perceived to be rising. This is because inflation erodes purchasing power, thus demand, for that particular currency.
Economic growth and health: Reports such as gross domestic product (GDP), employment levels, retail sales, capacity utilization and others, detail the levels of a country's economic growth and health. Generally, the more healthy and robust a country's economy, the better its currency will perform, and the more demand for it there will be.
Saturday, September 15, 2007
Market size and liquidity
Market size and liquidity
The foreign exchange market is unique because of
*its trading volume,
*the extreme liquidity of the market,
*the large number of, and variety of, traders in the market,
*its geographical dispersion,
*its long trading hours: 24 hours a day (except on weekends),
*the variety of factors that affect exchange rates.
Average daily global turnover in traditional foreign exchange market transactions totaled $2.7 trillion in April 2006 according to IFSL estimates based on semi-annual London, New York, Tokyo and Singapore Foreign Exchange Committee data. Overall turnover, including non-traditional foreign exchange derivatives and products traded on exchanges, averaged around $2.9 trillion a day. This was more than ten times the size of the combined daily turnover on all the world’s equity markets. Foreign exchange trading increased by 38% between April 2005 and April 2006 and has more than doubled since 2001. This is largely due to the growing importance of foreign exchange as an asset class and an increase in fund management assets, particularly of hedge funds and pension funds. The diverse selection of execution venues such as internet trading platforms has also made it easier for retail traders to trade in the foreign exchange market.
Because foreign exchange is an OTC market where brokers/dealers negotiate directly with one another, there is no central exchange or clearing house. The biggest geographic trading centre is the UK, primarily London, which according to IFSL estimates has increased its share of global turnover in traditional transactions from 31.3% in April 2004 to 32.4% in April 2006.
The ten most active traders account for almost 73% of trading volume, according to The Wall Street Journal Europe, (2/9/06 p. 20). These large international banks continually provide the market with both bid (buy) and ask (sell) prices. The bid/ask spread is the difference between the price at which a bank or market maker will sell ("ask", or "offer") and the price at which a market-maker will buy ("bid") from a wholesale customer. This spread is minimal for actively traded pairs of currencies, usually 0–3 pips. For example, the bid/ask quote of EUR/USD might be 1.2200/1.2203. Minimum trading size for most deals is usually $100,000.
These spreads might not apply to retail customers at banks, which will routinely mark up the difference to say 1.2100 / 1.2300 for transfers, or say 1.2000 / 1.2400 for banknotes or travelers' checks. Spot prices at market makers vary, but on EUR/USD are usually no more than 3 pips wide (i.e. 0.0003). Competition has greatly increased with pip spreads shrinking on the major pairs to as little as 1 to 2 pips.
The foreign exchange market is unique because of
*its trading volume,
*the extreme liquidity of the market,
*the large number of, and variety of, traders in the market,
*its geographical dispersion,
*its long trading hours: 24 hours a day (except on weekends),
*the variety of factors that affect exchange rates.
Average daily global turnover in traditional foreign exchange market transactions totaled $2.7 trillion in April 2006 according to IFSL estimates based on semi-annual London, New York, Tokyo and Singapore Foreign Exchange Committee data. Overall turnover, including non-traditional foreign exchange derivatives and products traded on exchanges, averaged around $2.9 trillion a day. This was more than ten times the size of the combined daily turnover on all the world’s equity markets. Foreign exchange trading increased by 38% between April 2005 and April 2006 and has more than doubled since 2001. This is largely due to the growing importance of foreign exchange as an asset class and an increase in fund management assets, particularly of hedge funds and pension funds. The diverse selection of execution venues such as internet trading platforms has also made it easier for retail traders to trade in the foreign exchange market.
Because foreign exchange is an OTC market where brokers/dealers negotiate directly with one another, there is no central exchange or clearing house. The biggest geographic trading centre is the UK, primarily London, which according to IFSL estimates has increased its share of global turnover in traditional transactions from 31.3% in April 2004 to 32.4% in April 2006.
The ten most active traders account for almost 73% of trading volume, according to The Wall Street Journal Europe, (2/9/06 p. 20). These large international banks continually provide the market with both bid (buy) and ask (sell) prices. The bid/ask spread is the difference between the price at which a bank or market maker will sell ("ask", or "offer") and the price at which a market-maker will buy ("bid") from a wholesale customer. This spread is minimal for actively traded pairs of currencies, usually 0–3 pips. For example, the bid/ask quote of EUR/USD might be 1.2200/1.2203. Minimum trading size for most deals is usually $100,000.
These spreads might not apply to retail customers at banks, which will routinely mark up the difference to say 1.2100 / 1.2300 for transfers, or say 1.2000 / 1.2400 for banknotes or travelers' checks. Spot prices at market makers vary, but on EUR/USD are usually no more than 3 pips wide (i.e. 0.0003). Competition has greatly increased with pip spreads shrinking on the major pairs to as little as 1 to 2 pips.
Foreign exchange market
Foreign exchange market
The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is by far the largest financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. The average daily trade in the global forex markets currently exceeds US$ 2–2.5 trillion [citation needed]. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks.
The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is by far the largest financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. The average daily trade in the global forex markets currently exceeds US$ 2–2.5 trillion [citation needed]. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks.
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