Foreign Exchange Market Facts

Is Forex for you?

Many traders in retail forex are still unfamiliar with foreign exchange even though it is the biggest market in the world in terms of finances. It became popular with the onset of trading via the internet which is just a few years back.

The Foreign exchange market was initially dominated by big institutions for finances, secret hedge funds and multinational companies and corporations. This has changed over the course of time and now the individual traders and investors want more information about this dynamic market.

Trading currencies does not happen on an exchange that has been regulated. This is its main difference from trading futures, options and stocks. There is no central group that governs and controls the trades. Clearing centers or houses do not exist to assure and confirm trades and no panels for arbitrations to settle disputes. Participants in forex trade with one another base them on agreed credit terms. Thus the business in the foreign exchange, which is the biggest market and the highest in terms of liquidity, entirely depends on trust.

This arrangement must be confusing to some investors who have been used to exchanges with established structures like the Chicago Mercantile Exchange and New York Stock Exchange but this really works since most of the participants need to compete and at the same time cooperate with one another for regulation which results in controlling the market effectively.

The Foreign exchange market differs from the other kinds of market mainly because no uptick ruling exists unlike in the market of stocks. In the futures market there is a limited size for positions to be held by a trader but in the currencies market the positions are limitless in terms of size. This would mean that the trader can sell currencies amounting to a hundred billion dollars if the trader can afford it.

There is no inside trading in the forex market. Most information about the market usually leaks before it is even released to the press. The Forex market is the market with the highest fluidity and liquidity. It continuously trades for twenty four hours each day. It usually does not contain gaps with their rates. It is the market with the largest accessibility with its global scope from Asia to North America.

Now you have answers to some basic questions commonly asked about the foreign exchange market. It will be helpful for those who are just beginning or who just need to review the basic trading information. So what do you think? Is Forex for you?