What Are Some Of The Factors That Make Forex Markets Different?
Posted by Nick Niesen on October 29th, 2010
There are a number of factors that make the Forex market unique. Many of these factors can have tremendous benefits for traders worldwide. Two of the most important are the high level of leverage and the extremely high liquidity.
Forex markets have some unique features that provide an incomparable potential for profitable currency trading in any market situation. A trader need not wait for the ?opening bell? as in the case of the exchange and has the opportunity to avail all fruitful market conditions at any time. Since the Foreign Exchange market is the most liquid market in the universe, traders can enter or exit the field at their will in any market condition.
As stated above, compared to the equity markets, Forex markets offer high leverage ratio. Although high leverage offers high profits, it may also expose the trader to extreme losses. Under normal market conditions, the bid/ask spread is less than 0.1% (10 pips). In the case of larger dealers, the spread could be smaller and may expand a lot in fast moving markets.
A bear market or a bull market for a particular currency is defined in terms of the positive or negative outlook of its future value against other currencies. If the outlook is positive, there exists a bull market for that currency where a trader would like to buy the said currency against other currencies. On the other hand, if the outlook is negative, there is a bull market for the other currencies against the said currency where a trader will be forced to sell that currency against other currencies. This way, the Foreign Exchange market is always a bull market and for traders there is always a bull market trading chance.
Telephones and electronic networks help the global network of Forex traders to communicate and engage in trade with their clients. No organized exchange is there to facilitate transactions in Foreign Exchange market unlike in the case of equity markets. It is not possible for a single trader or even a central bank to control the market price for so long that the Forex market is so huge with numerous participants. When interventions are made even by mighty central banks, results turn to be ineffective and short-lived. For this reason, central banks are becoming little interested in interfering to manipulate market prices.
The Foreign Exchange market is known to be an unregulated market although banking laws regulate the activities of major dealers like commercial banks in money centers. No law specific to the Forex market controls the retail Forex brokerages in their daily operations and many of such institutions in the United States do not even give reports to the Internal Revenue Service.
To Your Forex Trading Success!
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About the AuthorNick Niesen
Joined: April 29th, 2015
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