How currency exchange market works
Forex market exists where one currency is traded for another currency. Foreign Exchange Market or formally known as FOREX, is generally works as an international currency exchange market. Investors and speculators now allowed to trade any currencies from all around the world thru the Forex market.
Forex is a very unique type of trading where traders are buying and selling 'money' in the same time. All the trading in forex market are done in pairs, such as Euro/JPY, USD/CHF, CAD/USD,GBY/JPY,EUR/USD and so many more. Right now,forex can be considered as the world largest trading market where an average of $1.9 trillion trades is done on a daily basis. The turnover rates in FOREX are nearly 30 times larger than the total volume of equity trades in United States.
Forex is relative new to the publics nonetheless. Forex trading only made available to the publics in year 1998 where big sized inter-bank units are sliced into smaller pieces and offered to individual traders like you and me. Before that time, Forex is only a game for banks, multi national cooperation, and big currency dealers.Public do not have chance to trade on that time. Only those with large business size and strong financial background were permitted to trade foreign currencies.
Forex broker comparison
Here i put some comparison for the forex broker
| Broker | Min Deposit | Commission | Max Leverage | ECN? | E-Gold? | MT4? | Since |
|---|---|---|---|---|---|---|---|
| Forex Club | $10 | $4/100k | -- | Y | N | N | 2000 |
| Easy-Forex | $50 | N | ??? | N | N | N | 2001 |
| iForex.com | $100 | N | 400:1 | N | N | N | 1996 |
| Hotspot FX | $7500 | $3/100k | 50:1 | Y | N | N | 2000 |
| Forex.com | $250 | N | 200:1 | N | N | N | 1998 |
| CMC Markets | $2000 | N | 100:1 | N | N | N | 2003 |
| FXCM | $300 | N | 200:1 | NDD | N | N | 1999 |
| FX Solutions | $250 | N | 400:1 | N | N | N | 1995 |
| Realtime Forex | €2500 | N | 50:1 | N | N | N | 2001 |
| Interactive Brokers | $5000 | $2/100k | 50:1 | Y | N | N | 1998 |
| Oanda | -- | N | 50:1 | N | N | N | 2001 |
| MG Forex | $200 | N | 400:1 | N | N | N | 2000 |
| CBFX | $500 | Y | 100:1 | N | N | N | 2001 |
| GFT Forex | $250 | N | 400:1 | N | N | N | 2001 |
| EFX Group | $400 | $5/100k | 100:1 | Y | -- | N | 2000 |
| MB Trading | $400 | Y | 100:1 | Y | N | -- | 2002 |
| LiteForex | $1 | N | 500:1 | Y | Y | -- | 2004 |
| FX Cast | $1 | N | 400:1 | N | Y | Y | 2005 |
| Dukascopy | $50,000 | N | -- | Y | N | -- | 2004 |
| FX Open | $1 | N | 500:1 | N | Y | Y | -- |
| Marketiva | $1 | N | -- | N | Y | N | 2005 |
| Swissnet Broker | $200 | N | -- | Y | N | -- | 2005 |
| Ava Fx | $100 | N | 200:1 | N | Y | N | 2006 |
| Real Trade Group | $20 | N | -- | N | Y | Y | 2003 |
| Money Forex | $250 | N | ??? | N | N | N | -- |
| Forex Web Trader | $250 | N | -- | -- | -- | -- | -- |
| IFC Markets | $1 | N | -- | -- | -- | -- | -- |
| North Finance | $100 | -- | 500:1 | N | N | Y | 2003 |
| Interbank FX | $250 | -- | 200:1 | N | N | Y | 2001 |
| GFX (Forex.ch) | $2000 | -- | -- | N | N | Y | 2006 |
Choosing a suitable Forex Broker
Before you decided to start to an investor,first of all, you need to find a forex broker.There are a many forex brokers you can find from the internet.Most of the forex broker will use metatrader as their platform.However,some of them will using their own platform.You need to decide which platform you can best suit.Here i list some of the forex brokerage form that mostly used worldwide.
LiteForex offers trading technology for beginner traders, and lets you start your first trading in the Forex market depositing just ONE DOLLAR! Your deposit appears in US cents on the Lite group accounts, so you feel like you are trading the same amount in US Dollars. This new technology allows Forex beginners to learn Forex in a REAL life situation with minimal investment!
LiteForex also offers competitive trading conditions for Forex professionals all around the world, and provides a dedicated Forex trading server and experienced customer support as well as analysis of Forex market and a professional affiliate program.
HY Markets is a leading online capital markets trading website. It offers both retail and institutional investors with quick and easy access to a range of financial markets including forex, oil/gas, metals, commodities, and stocks. HY Markets is a trading name of Henyep Investment (UK) Limited, authorized and regulated by the FSA of the United Kingdom and is a division of the Henyep Group, a diversified financial conglomerate with over 25 years of operational history and operations across three continents.
Dukascopy (Suisse) SA is a Swiss regulated Brokerage House. Dukascopy provides access to the first Decentralized Marketplace in the world (SWFX - Swiss FX Marketplace), combining liquidity of Centralized marketplaces and a number of banks.
Dukascopy (Suisse) SA offers direct access to the SWFX Swiss FX Marketplace, the most efficient market in the world. This exchange provides the largest pool of interbank spot forex liquidity available for banks, hedge funds, institutions and professional traders.
dbFX is an online Foreign Exchange Trading Service provided by Deutsche Bank AG. You can trade with Deutsche Bank, the pre-eminent provider of liquidity in the world's foreign exchange markets. dbFX offers online margin foreign exchange trading with real-time, streaming pricing.
A unique commision free online forex and CFDs trading system that allows you engage in trading on the world forex market.
MoneyForex Financial Ltd. is one of the world leading online currency trading broker offering low pips and commission-free online forex trading. Founded by Wall Street veterans, MoneyForex's vision is to service individual and corporate investors such as money managers, banks, and financial institutions in easing the complexity in dealing with forex trading. Our dealing software which specialized in forex dealing is rated second to none for it user friendly environment. Lightning speed and efficient execution is one of its many benefits.
GFX Group SA is unique in offering narrow spreads, 200:1 leverage, and commission-free trading in 49 currency pairs. GFX’s financial stability and substantial capitalization, combined with an outstanding level of client service, offer a secure and reliable trading environment.
The Man Group can trace its origins back to 1783 when James Man first established a sugar broking business in the City of London. Man Group PLC is now a FTSE 100 company (EMG.L) and Man Financial is the Worlds largest Independant Futures Broker.
The Company Western Capital Forex S. A. was established in Geneva (Switzerland) in February 1990 as an investment advisor and financial markets analyst. Over the years the Company gained experience in market analysis as well as in managing funds for its own account and for various international clients.
Since early 2000, the Company has been regulated by the OAR-G which is one of the self regulatory bodies in Switzerland. The Company is also member of the Swiss Group of Independent Financial Advisors (GSCGI).
A multilingual support service is operating 24 hours a day and is trained to assist the clients in every question relating to the use of the system.
FxPro offers an array of sophisticated trading tools and services including the industry's advanced trading conditions for CFDs on spot FX, Futures, stocks and spot precious metals. With in-depth brokerage, trading and banking experienced gained by company’s founders and its management, EuroOrient Securities and Financial Services Ltd through its brand name - FxPro.com, embodies its core mission: to provide clients with leading edge technology, best execution and exemplary customer service.
Why you should join forex?
1. TRANSPARENT, LEVEL PLAYING FIELD
All market participants can bid and offer in addition to hitting and paying the bid/offer.
Traders can save spread and commissions by entering bids and offers. Additionally, by allowing all traders to bid and offer, all traders to be market makers with an equal opportunity to
earn the bid/offer spread. This unique feature can add value to the bottom line of your
trading account.
We do not compete against customer orders,take or carry positions. This avoids a conflict of interest inherent in FX trading. All trades are executed following interbank protocol.
Profe
ssional, experienced, FX experts manage our sales/trading customer service desk. Stoploss and take profit orders are watched and executed with great care. Because we do not
trade against customer orders, our execution desk is 100% focused on facilitating
customer orders.
Most of the forex broker spreads on forex in the major currency pairs are consistently 1 to 3 points wide, with most pairs quoted in 10 million units.
All prices on are live or realtime. When a trader clicks on a price there is no need to wait for confirmation that the price is still 'good'. The price you see is the price you deal on.
Fast isn't the right word for the platform. Sub-second execution is.
Traders' identities, trading activities and positions are fully anonymous.
Trading platform provides valuable market data: Prices and sizes for all bids/offers, the number of participants on each bid/offer are seen by all clients. Real-time, web-based reports are available 24 hours a day.
10. EARN INTEREST ON TRADING POSITIONS/ACCOUNT BALANCES
Client positions long a higher interest bearing currency/short a lower interest bearing currency earn interest. Also, accounts with balances exceeding $20,000 earn competitive interest rates
How To Control Risk??
Trading forex comes down to risk management. If a forex trader takes a position in a currency, and sits on it for 3 months, while he may profit, he is exposed to the same kind of risk as if he were not trading. In other words, during that 3 month period, many things can happen to make that position open to risk. Utilizing stop losses, and actively trading, is in itself a risk management policy, rather than a strategy of knowing where the market will go. For a forex trader, the risk management side is inherently more important than guessing which direction the market will go.
It is those funds and forex traders, who are maxed to the hilt with high margins, with no stop losses, that expose their clients to the huge risks in the forex markets. Consider purchasing 100k EUR/USD at 1.2020 expecting a rise to 1.2100 (with a stop at 1.2000). If you are trading 100,000, you have taken a 100% cash position. If the EUR/USD goes as expected, you would make a profit of $800, or .8%. If it goes against you, you would lose $200, or .2%. So you are risking .2% to gain .8%. What many traders might do is take a 1,000k (1 million) position, which is 10:1 margin. This increases your P/L by 10 x - so that .2% loss is 2%, and the .8% gain is 8%. This is where risk comes into the forex market. So, it is not the forex market itself, or forex trading itself, that is risky, but rather, the risk management policy of forex dealers. Good dealers will first have a solid risk management policy, and second, develop a trading strategy.
Finally, during volatile times, or if a trader just wants to have a go at making 100 points, it is possible to take a less than 100% cash position, totally limiting the risk of loss. Using the example above, where you have 100,000 in your account, it is possible to trade 10k lots instead of 100k lots, putting you in a position of only 10% cash, or negative margin. This means the above trade loss goes from .2% to .02% - as well, your gains are also limited to .08% instead of .8%. However during certain volatile times trying to make a small profit may be better than exposing funds to potential losses.
Forex trading allows for a great degree of risk management not available in other capital markets. Margin, being able to buy or sell without limit, high liquidity (2.3 trillion traded daily), and a 24/6 market, give only the forex market to be so flexible regarding risk. In other words it is not possible to have such a sophisticated risk management policy in other markets.
- Buy OR sell (compared to stocks where you can not always go short)
- Always find a buyer or seller (the forex market is the only real liquid market in the world. It is impossible you want to trade and cannot find a buyer or seller)
- Use high margin, or trade conservatively
- Take opposite positions at the same time
- Take multiple positions (instead of selling EUR/USD, take multiple EUR positions against the crosses such as EUR/GBP, EUR/CHF, as a hedge against your first EUR/USD position)
The above factors are the real opportunities in the forex market, not the potential to make 100% that exist in other markets such as the stock market.
What Is Forex Trading??
The Forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.
The main enticements of currency dealing to private investors and attractions for short-term Forex trading are:
- 24-hour trading, 5 days a week with non-stop access to global Forex dealers.
- An enormous liquid market making it easy to trade most currencies.
- Volatile markets offering profit opportunities.
- Standard instruments for controlling risk exposure.
- The ability to profit in rising or falling markets.
- Leveraged trading with low margin requirements.
- Many options for zero commission trading.