|
Inter-bank
Market
The
basis of the FOREX
market depends on
a global network
of dealers that
correspond and
trade with their
clients through
electronic
networks and
telephones. There
are no exchanges
which are
organized like in
futures which are
present to serve
as a central
location to ease
transactions the
way the New York
Stock Exchange
assists the equity
markets.
In
actual fact, the FOREX
market functions a lot
like the way the NASDAQ
stock market in the
United States works.
And due to this it is
also known as an
over-the-counter or OTC
market.
Nobody
can corner the market.
The FOREX market is
also so massive and has
so many participants
that no single trader,
or even a central bank,
can get hold of the
market price for an
extensive period of
time.
Even
when interventions
are carried out by
huge central
banks, they are
beginning to be
gradually more
ineffectual and
short-lived. This
therefore shows
how central banks
are slowly
becoming less and
less inclined to
interfere in order
to control market
prices.
Forex is not
regulated
The
FOREX market is
often considered
as a market which
is unregulated,
despite the fact
that the
operations of
major dealers such
as commercial
banks in money
centers are
actually regulated
under the banking
laws.
The
day to day operations
of retail FOREX dealers
aren’t regulated under
any laws. Or if they
are, only by
regulations that are
particularly for the
FOREX market. In actual
fact, many of these
sort of organizations
in the United States
don’t even report to
the Internal Revenue
Service.
The
currency futures and
options that are really
traded on exchanges
like Chicago Mercantile
Exchange (CME) are
under the same
regulation as other
exchange-traded
derivatives.
There
are many various
upsides to trading with
FOREX instead of just
futures or stocks.
These advantages
include:
1.
Lower
Margins
Just
like stock speculation
and futures, a FOREX
trader is able to
manage a big amount of
the currency by just
putting up a small
amount of margin.
Nevertheless, the
margin requirements
that are wanted for
trading futures are
usually about 5% of the
entire value of the
holding, or 50% of the
total value of the
stocks, the margin
requirements for FOREX
is about 1%. As an
example, the margin
needed to trade foreign
exchange is $1000 for
every
$100,000.
This
implies that by trading
FOREX, the money of a
currency trader can
play with 5-times as
much value of product
as a futures trader's,
or even 50 times more
than a stock
trader's.
When
you are trading on
margin, this can be an
extremely profitable
method to create a
strategy for
investment, but it is
important that you take
enough time to comprehend the risks
that are implicated as well.
Read more about Forex now
|
