haracteristics of the forex market

7/29/2019 Haracteristics of the Forex Market

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haracteristics of the Forex Market

Being the world's largest financial market, the foreign exchange (or forex) market offersunmatched benefits and advantages to the prospective investor. With superior liquidity andleverage compared to stocks and futures markets, the forex market is arguably the bestfinancial investment you can find.

What makes the forex market an excellent financial market? The characteristics that makethe forex market a good one are lower trading costs, excellent transparency, superiorliquidity and very strong market trends.

LOWER TRADING COSTS

Ask anyone dealing in stocks and they will tell you that they have to shell thousands ofdollars to get started. Not so with the forex market. With just a few hundred dollars (often$250 or less), you can open a mini forex account and start trading!

The lower trading costs in the forex market has made it possible for even small, individualinvestors to make decent profits fromforex trading. With lower costs, the possible losses arealso much lower. You will discover that forex trading usually has no commission fees unlike inother investments. The costs of forex trading are limited to the spread or the differencebetween the selling and buying prices for a particular currency pair.

EXCELLENT TRANSPARENCY

Transparency means the free access to trading information. Forex trading is a transparentprocess because the trader has full access to market data and information that are necessaryto perform successful transactions. The excellent transparency of the forex market means

that forex traders have more control over their investments and can decide what to do basedon the information available.

SUPERIOR LIQUIDITY

In a forex market, traders are free to buy and sell currencies of their own choosing. Thesuperior liquidity of the forex market enables traders to easily exchange currencies withoutaffecting the prices of the currencies being traded.

So whether you trade a few thousand dollars or several millions, you can be assured of thesame currency prices during the time an order was placed and then executed. The forexmarket's superior liquidity allows you to get the profits you expect at the time you made thetrade.

STRONG MARKET TRENDS

Forex traders make money by getting accurate market data and then analyzing the directionthe market takes. To do this, forex traders rely heavily on trends and trending in an attemptto predict the direction of the forex market. Most traders use technical analysis to analyzepast and present forex market data and then search for trends.

Other financial markets use trends and trending but this characteristic is much stronger inthe forex market. Due to strong trending, forex markets are much easier to analyze andidentify possible entry and exit positions during trading.

Now you already know the characteristics that make the forex market a sound, financially-

stable and profitable investment area, maybe it's time to put your money into the forexmarket and earn handsome profits. You can just take advantage of the forex market'spositive assets and make your money work for you.
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Characteristics of Forex MarketIn recent years, the foreign exchange market could favor more and more people, it

becomes a favorite for the international investors, and this is strongly related to the

characteristics of the Forex market. The main characteristics of the foreign exchange

market are:

1st, It consists market but no trading field

The finance industry in the western countries consist two sets of systems, namely the

centralism business central operation and there is no fixed place for such business

network. Stock trading is being traded through stock exchange. Like the New York Stock

Exchange, the London stock market, the Tokyo stock market, respectively is American,

English, the Japanese stock main transaction place, it is a centralism business financialcommodity, its quoted price, the transaction time and hand over to the procedure all

consist of unification the stipulation, and has established the same business association,

it has formulated the same business rules. The investor could buy and sells the

commodity through the broker company, this is known as "consist of trading market and

trading field".

But foreign exchange business is done without any unification operation market and

business network, it has no centralism unified place like the stock transaction. But, the

foreign currency trading network actually is globally, and it has formed a organization

which has no formal organization, the market is relied through an approval way and the

advanced information system, Forex traders do not consist any membership qualification

for any organization, but must obtain colleagues trust and approval. This kind of Forexmarket which has no trading field is known as "consist of market but no trading field".

Each day, the trading volume in the global Forex market involves billions of U.S dollars,

the so huge large amount fund, is being control under both the non-centralism place and

non central governance system, plus it is settle based on non-government governance.

2nd, Circulation work

Due to the different geographical position of the various financial centre, the Asian

market, the European market, the Americas market because of the time difference

relations, it has become an entire day 24 hour continued operation whole world foreign

exchange market.

Early morning 0830 (New York time) New York market opens, 0930 Chicago market

opens, 1830 Sydney opens, 1930 Tokyo opens, 2030 Hong Kong, Singapore open,

before dawn 1430 Frankfurt opens, 1530 o'clock London market opens. So 24 hours

uninterrupted movements, the foreign exchange market becomes a day and night

market, only on Saturday, Sunday as well as the various countries' significant holiday,

the foreign exchange market only then can close.

This kind of continued operation, provided no time and spatial barrier ideal outlet for

investors, the Forex trader may seek the best opportunity to carry on the transaction.

For instance, Forex trader buys up the Japanese Yen in the morning at the New York

market, in the evening Hong Kong market opens the Japanese Yen rises, the Forex

trader sells in the Hong Kong market, no matter Forex trader in where, he all may

participate in any market, any time business. Therefore, the foreign exchange marketmay say is does not have the time and the spatial barrier market.


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3rd, Zero and Game

In the stock market, the rise or the drop of stock market could influence the value of the

stock whether to rise or drop, for example the Japanese new date iron stock price falls

from 800 Japanese Yen to 400 Japanese Yen, the value of this stock has been reduced to

half. However, in the foreign exchange market, the value of a stock and a currency is

being calculated differently, this is because the exchange rate is refers to the exchangeratio both countries currency, the exchange rate change will influence one kind of

monetary value to reduce and at the same time another kind of monetary value

increase. For instance in 22 years ago, 1 US dollar exchanges 360 Japanese Yen, at

present, 1 US dollar exchanges 110 Japanese Yen, this explains the Japanese Yen

currency value rise, but US dollar currency value drops, in the end the value will not

reduce or increase. Therefore, some people described the foreign currency trading is

"zero and the game", exactly said is the wealth shift.

In recent years, investment foreign exchange market fund has continuously increased,

the exchange rate fluctuation expands day by day, urges the wealth shift to be larger,

the daily trading volume of the global foreign exchange involves 150 billion US dollars,

the rise or falls 1%, means that the 150 billion funds has been shifted. Although the

foreign exchange rate change is very big, but, any kind of currency will not become

waste paper, even if some kind of currency unceasingly falls, however, but generally it

represents certain value, only if such currency has been abolished.

ntroduction to Foreign Exchange Markets

Being the main force driving the global economic market, currency is no doubt an essential element for acountry. However, in order for all the countries with different currencies to trade with one another, a

system of exchange rate between their currencies is needed; this system, is formally known as foreign

exchange or currency exchange.

In the early days, the system of currency exchange is supported solely by the gold amount held in the

vault of a country. However, this system is no longer appropriate now due to inflation and hence, the

value of ones currency nowadays is determined through the market forces alone. In order to determine

the value of a currencys exchange rate, two main types of system is used which is floating currency and

pegged currency.

For floating exchange rate, its value is determined by the supply and demand of the global market where

the supply and demand is bound by all these factors such as foreign investment, inflation and ratios ofimport and export. Normally, this system is adopted by most of the advance countries like for example

UK, US and Canada. All of these countries have a similarity where their market is well developed and

stable in economic terms. These countries choose to practice this system due to the reason where

floating exchange rate is proven to be much more efficient compared to the pegged exchange rate. The

reason behind this is because for floating exchange rate, the market itself will re-adjust the exchange rate

real-time in order to portray the actual inflation and other economic forces. However, every system has

its own flaw and so does the floating exchange rate system. For instance, if a country suffers from

economic instability due to various reasons such as political issues, a floating exchange rate system will

certainly discourage investment due to the high risk of suffering from inflationary disaster or sudden

slump in exchange rate.

Another form of exchange rate is known as pegged exchange rate. This is a system where the value of the

exchange rate is fixed by the government of a country and not the supply and demand of the market.

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This system is called pegged exchange rate because the value of a countrys currency is fixed to another

countrys currency. As a result, the value of the pegged currency will not fluctuate unlike the floating

currency. The working principle behind this system is slightly complicated where the government of a

country will fixed the exchange rate of their currency and when there is a demand for a certain currency

resulting a rise in the exchange rate, the government will have to release enough of that currency into

the market in order to meet that demand. However, there is a fatal flaw in this system where if thepegged exchange rate is not controlled properly, panics may arise within the country and as a result of

that, people will be rushing to exchange their money into a more stable currency. When that happens,

the sudden overflow of that countrys currency into the market will decrease the value of their exchange

rate and in the end, their currency will be worthless. Due to this reason, only those under-developed or

developing countries will practice this method as a form to control the inflation rate.

However, the truth is, most of the countries do not fully practice the floating exchange rate or the pegged

exchange rate method in reality. Instead, they use a hybrid system known as floating peg. Floating peg is

the combination of the two main systems where one country will normally fixed their exchange rate to

the US Dollars and after that, they will constantly review their peg rate in order to stay in line with the

actual market value.

The Foreign exchange market, or commonly known as FOREX, is the largest and most prolific financial

market because each day, more than 1 trillion worth of currency exchange takes place between

investors, speculators and countries. From this, we can deduce that the actual mechanism behind the

world of foreign exchange is far more complicated than what we may already know, and that, the

information mentioned earlier is just the tip of an iceberg.

Introduction to Foreign Exchange Markets|Forex Basics|Forex Development History|Foreign exchange

rate|Characteristics of Forex Market|Difference Between Forex and Futures|Famous Forex Quotes|Foreign Market

Existence|Forex Charts|Forex Trading|To day currency rates

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Lesson 3Characteristics of the Forex Market

24-Hour Market

Other than the weekends when it is closed, the forex market is open 24 hours a day. There is no need to wait for the

market to open and you can trade anytime you like. This flexibility has enabled many working professionals to take on

forex trading as a side job. They can trade in the morning, afternoon, night or whenever they are free. The best thing is

that this also means that no one can monopolize the market!

The forex market is so huge that no single entity, be it an organization, a group, a central bank or even the government

can control the market trend.

Leverage

In forex trading, only a small margin is needed to purchase a contract of a much higher value. Leverage enables you to

earn high returns while minimizing capital risks. For example, a leverage of 200:1 granted by a forex broker would allow

a trader to buy or sell USD 10,000 worth of currency with a margin of USD 50. Similarly, you would be able to trade

USD 100,000 with just USD 500. However, leverage can be a double-edged sword. Without proper risk management,

such high leverage trading may result in huge losses or profits.

High liquidity

In view of the huge trading volume in the forex market, under normal conditions, you can buy or sell currency at your

desired price in a mere matter of seconds with just a simple click of the mouse. You can even setup an online trading

platform to buy and sell (place order) at the right price so that you can control your profit margin and cut losses. The
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trading platform will execute everything for you automatically. It is fast and simple.

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In addition to free simulation accounts, many trading platforms also provide news, charts and analyses free of charge.

Market movements in a simulation account are the same as those in the actual forex market. Use a simulation account

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You will only need a computer with Internet access. It is that simple! There is no need for you to spend thousands of

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haracteristics of the forex market

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