Forex for a trader
Forex is an over the counter market which means

Forex is an over the counter market which meansWhat is 'Over-The-Counter - OTC' Over-the-counter (OTC) is a security traded in some context other than on a formal exchange such as the New York Stock Exchange (NYSE), Toronto Stock Exchange or the NYSE MKT, formerly known as the American Stock Exchange (AMEX). The phrase "over-the-counter" can be used to refer to stocks that trade via a dealer network as opposed to on a centralized exchange. It also refers to debt securities and other financial instruments, such as derivatives, which are traded through a dealer network. Interdealer Quotation System. Over-the-Counter Exchange of India . BREAKING DOWN 'Over-The-Counter - OTC' For many investors, there is little practical difference between OTC and major exchanges. Improvements in electronic quotation and trading have facilitated higher liquidity and better information. However, there are key differences between the transaction mediums. On an exchange, every party is exposed to offers by every other counterparty, which may not be the case in dealer networks. There is less transparency and less stringent regulation on these exchange," so unsophisticated investors take on additional risk and could be subject to adverse conditions. Popular OTC Networks. The OTC Markets Group operates some of the most well-known networks, such as the OTCQX Best Market, the OTCQB Venture Market and the Pink Open Market. These markets include unlisted stocks that are known to trade on the Over the Counter Bulletin Board (OTCBB) or on the pink sheets. Although Nasdaq operates as a dealer network, Nasdaq stocks are generally not classified as OTC because the Nasdaq is considered a stock exchange. Conversely, OTCBB stocks are often either penny stocks or are offered by companies with bad credit records. The OTCQX Best Market includes securities of companies that have the largest market caps and greater liquidity than the other markets.

The OTCBB trades stocks that are small and developing, and that report to regulators. Pink sheets stocks come in a wide variety. Securities on OTC Networks. Stocks are usually traded OTC because the company is small and cannot meet exchange listing requirements. Also known as unlisted stock, these securities are traded by broker-dealers who negotiate directly with one another over computer networks and by phone. The dealers act as market makers, and the OTC Bulletin Board is an inter-dealer quotation system that provides trading information. Some well-known large companies are listed on the OTC markets. For instance, the OTCQX trades Allianz, BASF, Roche and Danone. American depository receipts, which represent shares in an equity that is traded on a foreign exchange, are often traded OTC, because the underlying company does not wish to meet the stringent exchange requirements. Instruments such as bonds do not trade on a formal exchange and are also considered OTC securities. Most debt instruments are traded by investment banks making markets for specific issues.

An investor must call the bank that makes the market in that bond and asks for quotes to buy or sell a bond. Understanding the Over the Counter Trading or OTC in Forex Market. Most of us trading in the forex market know that transactions happen over the counter, but generally we are so engrossed in getting our individual trade right that we have very little patience to understand the mechanics of the market and how trade happens in the Over the Counter format. You might be feeling how does it matter as long as my profits are in place? Well, I would say that overlooking the inherent structure of any market might eat into your profits too. The structure of the forex market is a crucial element that can help you design your trading day and help you strategize better. The way in which the currency pairs are traded in the forex market is the most important element that goes on to make the basics of the currency market globally. This is crucial as it has a direct bearing on the participants who get into this trade, the regulations governing them as well as the overall size of the forex market. What Is Over The Counter Trading? So what do you understand when it is said that price action in the forex market is conducted over the counter? Well, let’s begin with a simpler analogy.

I am sure all of you understand what over the counter drugs are. You can simply walk to the drug store, ask for these OTC medicines without any specific prescription or medical history. The same theory applies here. Trading in the forex market is not channelized via any centralized exchange like you have in equity trade. All the different types of forex products that traders or investors trade in is always via market medium or a market maker. This is commonly a bank or a forex brokerage firm that helps in facilitating your desired trade and help you in buying and selling specific quotes from customers and taking orders from them. Unlike an exchange traded transaction, where the exchange is the trading counter-party, the brokerage firm or the bank that is enabling the trade becomes the counter-party. As the market place is not regulated strictly by any single governing body, prices are market determined, and there is generally heavy competition and prices keep varying as per the market forces. There is no standardized pricing, and the demand and supply dynamics keep on interfering with the live prices. Execution too varies as per demand. So the key feature of OTC in forex market includes: Absence of any centralized exchange system to regulate trade No standardized pricing system and prices dependant on market dynamics State of art networking to connect traders globally and enable long and short distance transaction through the simple click of the mouse Presence of an inter-bank market, essentially the tie up between banks that is a key catalyst for forex trade. The inter-bank market is crucial as it brings forth the essential liquidity and efficiency in these over the counter trades. How Is The Forex OTC Trade Different From Stock Market? Well, this might be the first question that comes to your mind that while the stock markets function equally efficiently, they have set exchanges for conducting trade, be it the NYSE or the Nasdaq.

So how is this OTC trade different and why do you need such a decentralized system for the forex market? For that first and foremost, we must understand the dynamics of the forex market. It is a global forum providing trading platform to traders across the world in one go. Needless to mention then that the volumes and the liquidity levels in the forex market are huge compared to any equity market. The daily turnover of the forex market exceeds $3 trillion. Now compare this to the combined volume of equity markets across the world. That still is pegged around a miniscule part of this amount at $30 billion. Thus, the essential construct of this market ensures that a more free flowing system with higher degree of efficiency is required. This is where the OTC trading concept comes to play. As trade is global, regulations of any specific country or any centralized authority does not dictate the dynamics of trade. Unlike equity market, transaction cost is lower as this system has also alleviated the need for any fees for exchange and clearing. Trade as I mentioned is solely by the electronic medium hence the efficiencies are way higher despite a significantly lower cost. Another advantage of the forex market over stocks is the direct dealing between traders and the market makers like the banks. There is absolutely no need for any middle man. Trade is also not time bound by any geographical or other limitation. The OTC spot forex market is a 24-hour trading profit nearing machine.

Traders can access the market anytime they want and tweak their trades in accordance to developing economic and geopolitical changes globally. Not just that you can execute your trade from the comfort of your bedroom. Everything is via the electronic medium and a strong global trading network. So unlike a stock market trader, you do not have to give up everything to trade in the forex market. One can easily maintain their day jobscollegeclasses or any other unavoidable engagement and then trade during your leisure time in the evening, at night or in transit. You can even double up as a stock market as well as a forex market player. In your free time or in between breaks from the stock markets, you could easily dabble in the Over The Counter forex market. Speed is another hallmark of the Over The Counter Trade. While order submissions and order executions could be time-consuming, the OTC trade in forex market ensures that all transactions are quick, easy to execute and instantly applicable. Depending on the market condition you can exit and enter at will. Products Used In OTC Forex Trade. Some of the key products used for trading via Over The Counter transaction in the forex market include: Spot forex Forwards trade Forex Options Forex Swaps.

There can be various other permutation and combinations of these while the actual trade is executed but essentially these constitute the primary ingredients of the OTC forex market broth. The Main Players in OTC Forex Market. Well, after the products, it is about the players. Right at the top we have the top money dealers including, Leading foreign exchange dealers All the major global banks like Goldman Sachs, HSBC, JPMOrgan and the like. Almost 60-70% of the daily forex market trade is handled by these banks through the complex inter-bank market. These banks are instrumental in setting the currency rates, managing demand-supply dynamics and overall trading volume. The next sub-group of the leading forex market players using the OTC channel includes both financial as well as retail participants. Even hedge funds, pension funds, MFs and other high networth investors have a significant stake in the final OTC forex market pie. The forex market brokers complete this circle and form an essential link with the retail users, the liquidity providers and also act as the intermediary buyerssellers. To draw to a close, the OTC forex market is expanding by leap sand bounds. Industry experts peg the growth at exponential rate encouraged by recent studies that indicated that nearly 85% of US investors preferred the OTC format of trading and transaction. The efficiency and the free flowing structure is what attract maximum traders to it. Must mention that ease of use is another big thumbs up. Just before you go, did you check This System? Make sure to do it now, otherwise you will regret. OTC has a particular significance in relation to IG's platform. Here, we define OTC in general investing and explain what it means to you when trading with IG. OTC stands for over-the-counter, and refers to a trade that is not made on a formal exchange.

It is often also referred to as off-exchange trading. Usually, the firms offering OTC trades will quote the prices at which they are willing to buy or sell assets, giving one price for each trade. This differs from on-exchange trades, where many buy and sell prices can be seen from a variety of different sources. The most popular OTC market in trading is forex, where currencies are exchanged between parties directly instead of on exchanges. This means that forex trading is decentralised, and can take place 24 hours a day – instead being limited to an exchange’s opening hours. Shares are often traded OTC as well as on exchanges. Some businesses, for example, sell their shares away from recognised exchanges. There are also networks and market makers that allow the trading of shares away from exchanges. These include multilateral trading facilities, dark pools and lit pools. Derivatives and bonds are also commonly traded over-the-counter, although different instruments will be traded in different ways. With IG. IG offers both OTC and on-exchange (via our DMA service) trading on forex and shares, allowing you to choose whether you trade at our price or view all available options on order books. When stockbroking with IG, we use smart order routing technology to search for additional liquidity across various ‘dark pools’ and ‘lit’ venues and source the best possible prices. Get answers about your account or our services. Or ask about opening an account on 1800 601 799, or +61 (3) 9860 1799, or helpdesk.

[email protected] com. We're here 24hrs a day from 1pm Saturday to 7am Saturday (AEST). Follow us online: CFDs are a leveraged product and can result in losses that exceed deposits. You do not own or have any interest in the underlying asset. Please consider the Margin Trading Product Disclosure Statement ( PDS) before entering into any CFD transaction with us. The value of shares and ETFs bought through an IG share trading account can fall as well as rise, which could mean getting back less than you originally put in. Please ensure you fully understand the risks and take care to manage your exposure. IG does not issues advice, recommendations or opinion in relation to acquiring, holding or disposing of our products. IG is not a financial advisor and all services are provided on an execution only basis. This website is owned and operated by IG Markets Limited. ABN 84 099 019 851, AFSL 220440. Derivatives issuer licence in New Zealand, FSP No. 18923. The information on this site is not directed at residents of the United States or any particular country outside Australia or New Zealand and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. The FOREX market is an ‘over the counter market’ (OTC) which means there is no physical or centralised exchange. Forex Trading With LiberalFX.

True ECN Spreads from 0.0 pips. True ECN Pricing with added liquidity from over 50 different banks and dark pool liquidity sources means tighter spreads across 60 forex pairs 245. Trade more on MetaTrader4. Trade 15 major indices contracts including the FTSE 100 and Dow Jones Index 24 hours a day with a spread of 1 point. With S&PASX 200 spreads from 1 point. Ultra fast order execution. Trade servers in New York & London means unrivaled trade execution speeds. Take advantage of ultra low latency fiber optic cross connects to a variety of VPS providers. The FOREX market is an ‘over the counter market’ (OTC) which means there is no physical or centralised exchange. The FOREX market trades 24 hours a day via a network of banks, corporations and individuals. Foreign Exchange (FX or FOREX) is the cornerstone of all international capital transactions and surpasses the huge American domestic money markets in terms of liquidity and depth; even the futures and stock markets are insignificant in comparison. The majority of Foreign Exchange transactions are neither directly related to international trade nor to international settlements but are in fact speculative in nature. For every trade-related transaction in the FOREX Market, there are about 7 to 9 speculative ones. Foreign Exchange is the world's fastest growing industry today and its growth can be attributed to its substantial liquidity and to the orderly manner in which it functions.

Spot FX, unlike stocks and futures instruments, are not traded on an exchange. Through technological advances in the electronic and telecommunications fields, networks of banks and brokers have gained access to a virtually instantaneous system of global transfers of information, data and funds. With the aid of such developments, spot FX has gained a significant advantage over other financial products that are limited to certain time zones and have to endure the erratic strains and confusion of trading floors. Banks and brokers these days operate on screen-based systems where two-way prices are continuously fed in and dealt on by participants. These systems guarantee greater transparency and instantaneous access to price information anywhere in the world. IFCOMM Compensation Insurance Scheme protects client deposits. LiberalFX's clients are eligible for IFCOMM's insurance fund. Liberal Forex does not accept applications from residents of the U. S. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Risk Warning: Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary. A Product Disclosure Statement (PDS) can be obtained either from this website or on request from our offices and should be considered before entering into a transaction with us. Over-The-Counter Market. What is an 'Over-The-Counter Market' A decentralized market, without a central physical location, where market participants trade with one another through various communication modes such as the telephone, email, and proprietary electronic trading systems. An over-the-counter (OTC) market and an exchange market are the two basic ways of organizing financial markets. In an OTC market, dealers act as market-makers by quoting prices at which they will buy and sell a security, currency, or other financial products.

A trade can be executed between two participants in an OTC market without others being aware of the price at which the transaction was completed. In general, OTC markets are typically less transparent than exchanges and are also subject to fewer regulations. Over-the-Counter Exchange of India . BREAKING DOWN 'Over-The-Counter Market' OTC markets are primarily used to trade bonds, currencies, derivatives, and structured products. They can also be used to trade equities, with examples such as the OTCQX, OTCQB, and OTC Pink marketplaces (previously the OTC Bulletin Board and Pink Sheets) in the U. S. Broker-dealers that operate in the U. S. OTC markets are regulated by the Financial Industry Regulatory Authority (FINRA). OTC markets are typically bifurcated into the customer market – where dealers trade with their clients such as corporations and institutions – and the interdealer market , where dealers trade with each other. The price a dealer quotes to a client may very well differ from the price quoted to another dealer, and the bid-ask spread may also be wider in the case of the former than in the latter. Risks of Over-The-Counter Markets. While OTC markets function well during normal times, there is an additional risk, called a counter-party risk, that one party in the transaction will default prior to the completion of the trade andor will not make the current and future payments required of them by the contract. Lack of transparency can also cause a vicious cycle to develop during times of financial stress, as was the case during the 2007-08 global credit crisis. Mortgage-backed securities and other derivatives such as CDOs and CMOs, which were traded solely in the OTC markets, could not be priced reliably as liquidity totally dried up in the absence of buyers.

This resulted in an increasing number of dealers withdrawing from their market-making functions, exacerbating the liquidity problem and causing a worldwide credit crunch. Among the regulatory initiatives undertaken in the aftermath of the crisis to resolve this issue was the use of clearinghouses for post-trade processing of OTC trades. OTC trading definition. OTC stands for over-the-counter, and refers to a trade that is not made on a formal exchange. Instead, most OTC trades will take place directly between two parties — often two traders, or a retail trader and a provider. Many OTC trades are handled via a dealer network. When you trade OTC with a trading provider, you'll usually see two prices listed: a single buy price, and a single sell price. This differs from on-exchange trading, where you'll see multiple buy and sell prices from lots of different parties. What markets can you trade OTC? OTC trading is a feature of many different financial markets, including shares, forex and bonds — as well as financial derivates such as CFDs. The most popular OTC market is forex, where currencies are bought and sold via a network of banks, instead of on exchanges. This means that forex trading is decentralised, and can take place 24 hours a day — instead of being limited to an exchange's opening hours. Can you trade shares over the counter?

Yes, shares can be traded OTC as well as on exchanges. Some businesses, for example, only sell their shares off exchange. There are also networks and market makers that allow the trading of shares away from exchanges. These include multilateral trading facilities, dark pools and lit pools. Who offers OTC stock? Lots of different companies might choose to offer their stock OTC instead of on an exchange. Penny stocks, for example, are shares that trade at comparatively low prices to shares in other companies. Many penny stocks don't fit the requirements for trading on a major exchange, so may sell their shares OTC instead. When you can buy OTC stocks directly, it's usually recommended to do so via a recognised stockbroker. IG offers both OTC and on-exchange (via our DMA service) trading on forex and shares, allowing you to choose whether you trade at our price or view all available options on order books. When share dealing with IG, we use smart order routing technology to search for additional liquidity across various ‘dark pools’ and ‘lit’ venues and source the best possible prices. Get answers about your account or our services. Or ask about opening an account on 0800 195 3100 or newaccounts. [email protected] com. We're here 24hrs a day from 8am Saturday to 10pm Friday. Follow us online: Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk. The value of shares, ETFs and ETCs bought through a share dealing account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results. CFD, share dealing and stocks and shares ISA accounts provided by IG Markets Ltd, spread betting provided by IG Index Ltd. IG is a trading name of IG Markets Ltd (a company registered in England and Wales under number 04008957) and IG Index Ltd (a company registered in England and Wales under number 01190902). Registered address at Cannon Bridge House, 25 Dowgate Hill, London EC4R 2YA. Both IG Markets Ltd (Register number 195355) and IG Index Ltd (Register number 114059) are authorised and regulated by the Financial Conduct Authority. The information on this site is not directed at residents of the United States, Belgium or any particular country outside the UK and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. OTC has a particular significance in relation to IG's platform. Here, we define OTC in general investing and explain what it means to you when trading with IG. OTC stands for over-the-counter, and refers to a trade that is not made on a formal exchange.

It is often also referred to as off-exchange trading. Usually, the firms offering OTC trades will quote the prices at which they are willing to buy or sell assets, giving one price for each trade. This differs from on-exchange trades, where many buy and sell prices can be seen from a variety of different sources. The most popular OTC market in trading is forex, where currencies are exchanged between parties directly instead of on exchanges. This means that forex trading is decentralised, and can take place 24 hours a day – instead being limited to an exchange’s opening hours. Shares are often traded OTC as well as on exchanges. Some businesses, for example, sell their shares away from recognised exchanges. There are also networks and market makers that allow the trading of shares away from exchanges. These include multilateral trading facilities, dark pools and lit pools. Derivatives and bonds are also commonly traded over-the-counter, although different instruments will be traded in different ways. With IG. IG offers both OTC and on-exchange (via our DMA service) trading on forex and shares, allowing you to choose whether you trade at our price or view all available options on order books. When stockbroking with IG, we use smart order routing technology to search for additional liquidity across various ‘dark pools’ and ‘lit’ venues and source the best possible prices. Get answers about your account or our services. Or ask about opening an account on 1800 601 799, or +61 (3) 9860 1799, or helpdesk. [email protected] com. We're here 24hrs a day from 1pm Saturday to 7am Saturday (AEST).

Follow us online: CFDs are a leveraged product and can result in losses that exceed deposits. You do not own or have any interest in the underlying asset. Please consider the Margin Trading Product Disclosure Statement ( PDS) before entering into any CFD transaction with us. The value of shares and ETFs bought through an IG share trading account can fall as well as rise, which could mean getting back less than you originally put in. Please ensure you fully understand the risks and take care to manage your exposure. IG does not issues advice, recommendations or opinion in relation to acquiring, holding or disposing of our products. IG is not a financial advisor and all services are provided on an execution only basis. This website is owned and operated by IG Markets Limited. ABN 84 099 019 851, AFSL 220440. Derivatives issuer licence in New Zealand, FSP No. 18923. The information on this site is not directed at residents of the United States or any particular country outside Australia or New Zealand and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Understanding the Over the Counter Trading or OTC in Forex Market.

Most of us trading in the forex market know that transactions happen over the counter, but generally we are so engrossed in getting our individual trade right that we have very little patience to understand the mechanics of the market and how trade happens in the Over the Counter format. You might be feeling how does it matter as long as my profits are in place? Well, I would say that overlooking the inherent structure of any market might eat into your profits too. The structure of the forex market is a crucial element that can help you design your trading day and help you strategize better. The way in which the currency pairs are traded in the forex market is the most important element that goes on to make the basics of the currency market globally. This is crucial as it has a direct bearing on the participants who get into this trade, the regulations governing them as well as the overall size of the forex market. What Is Over The Counter Trading? So what do you understand when it is said that price action in the forex market is conducted over the counter? Well, let’s begin with a simpler analogy. I am sure all of you understand what over the counter drugs are. You can simply walk to the drug store, ask for these OTC medicines without any specific prescription or medical history. The same theory applies here. Trading in the forex market is not channelized via any centralized exchange like you have in equity trade. All the different types of forex products that traders or investors trade in is always via market medium or a market maker. This is commonly a bank or a forex brokerage firm that helps in facilitating your desired trade and help you in buying and selling specific quotes from customers and taking orders from them.

Unlike an exchange traded transaction, where the exchange is the trading counter-party, the brokerage firm or the bank that is enabling the trade becomes the counter-party. As the market place is not regulated strictly by any single governing body, prices are market determined, and there is generally heavy competition and prices keep varying as per the market forces. There is no standardized pricing, and the demand and supply dynamics keep on interfering with the live prices. Execution too varies as per demand. So the key feature of OTC in forex market includes: Absence of any centralized exchange system to regulate trade No standardized pricing system and prices dependant on market dynamics State of art networking to connect traders globally and enable long and short distance transaction through the simple click of the mouse Presence of an inter-bank market, essentially the tie up between banks that is a key catalyst for forex trade. The inter-bank market is crucial as it brings forth the essential liquidity and efficiency in these over the counter trades. How Is The Forex OTC Trade Different From Stock Market? Well, this might be the first question that comes to your mind that while the stock markets function equally efficiently, they have set exchanges for conducting trade, be it the NYSE or the Nasdaq. So how is this OTC trade different and why do you need such a decentralized system for the forex market? For that first and foremost, we must understand the dynamics of the forex market. It is a global forum providing trading platform to traders across the world in one go. Needless to mention then that the volumes and the liquidity levels in the forex market are huge compared to any equity market. The daily turnover of the forex market exceeds $3 trillion.

Now compare this to the combined volume of equity markets across the world. That still is pegged around a miniscule part of this amount at $30 billion. Thus, the essential construct of this market ensures that a more free flowing system with higher degree of efficiency is required. This is where the OTC trading concept comes to play. As trade is global, regulations of any specific country or any centralized authority does not dictate the dynamics of trade. Unlike equity market, transaction cost is lower as this system has also alleviated the need for any fees for exchange and clearing. Trade as I mentioned is solely by the electronic medium hence the efficiencies are way higher despite a significantly lower cost. Another advantage of the forex market over stocks is the direct dealing between traders and the market makers like the banks. There is absolutely no need for any middle man. Trade is also not time bound by any geographical or other limitation. The OTC spot forex market is a 24-hour trading profit nearing machine. Traders can access the market anytime they want and tweak their trades in accordance to developing economic and geopolitical changes globally. Not just that you can execute your trade from the comfort of your bedroom.

Everything is via the electronic medium and a strong global trading network. So unlike a stock market trader, you do not have to give up everything to trade in the forex market. One can easily maintain their day jobscollegeclasses or any other unavoidable engagement and then trade during your leisure time in the evening, at night or in transit. You can even double up as a stock market as well as a forex market player. In your free time or in between breaks from the stock markets, you could easily dabble in the Over The Counter forex market. Speed is another hallmark of the Over The Counter Trade. While order submissions and order executions could be time-consuming, the OTC trade in forex market ensures that all transactions are quick, easy to execute and instantly applicable. Depending on the market condition you can exit and enter at will. Products Used In OTC Forex Trade. Some of the key products used for trading via Over The Counter transaction in the forex market include: Spot forex Forwards trade Forex Options Forex Swaps. There can be various other permutation and combinations of these while the actual trade is executed but essentially these constitute the primary ingredients of the OTC forex market broth. The Main Players in OTC Forex Market.

Well, after the products, it is about the players. Right at the top we have the top money dealers including, Leading foreign exchange dealers All the major global banks like Goldman Sachs, HSBC, JPMOrgan and the like. Almost 60-70% of the daily forex market trade is handled by these banks through the complex inter-bank market. These banks are instrumental in setting the currency rates, managing demand-supply dynamics and overall trading volume. The next sub-group of the leading forex market players using the OTC channel includes both financial as well as retail participants. Even hedge funds, pension funds, MFs and other high networth investors have a significant stake in the final OTC forex market pie. The forex market brokers complete this circle and form an essential link with the retail users, the liquidity providers and also act as the intermediary buyerssellers. To draw to a close, the OTC forex market is expanding by leap sand bounds. Industry experts peg the growth at exponential rate encouraged by recent studies that indicated that nearly 85% of US investors preferred the OTC format of trading and transaction. The efficiency and the free flowing structure is what attract maximum traders to it. Must mention that ease of use is another big thumbs up. Just before you go, did you check This System? Make sure to do it now, otherwise you will regret. Part 1: What Is Forex Trading ? – A Definition & Introduction. An Introduction to FOREX Trading: This free Forex mini-course is designed to teach you the basics of the Forex market and Forex trading in a non-boring way. I know you can find this information elsewhere on the web, but let’s face it; most of it is scattered and pretty dry to read. I will try to make this tutorial as fun as possible so that you can learn about Forex trading and have a good time doing it. Upon completion of this course you will have a solid understanding of the Forex market and Forex trading, and you will then be ready to progress to learning real-world Forex trading strategies.

What is the Forex market? • What is Forex? – The basics… Basically, the Forex market is where banks, businesses, governments, investors and traders come to exchange and speculate on currencies. The Forex market is also referred to as the ‘Fx market’, ‘Currency market’, ‘Foreign exchange currency market’ or ‘Foreign currency market’, and it is the largest and most liquid market in the world with an average daily turnover of $3.98 trillion. The Fx market is open 24 hours a day, 5 days a week with the most important world trading centers being located in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris, and Sydney. It should be noted that there is no central marketplace for the Forex market; trading is instead said to be conducted ‘over the counter’; it’s not like stocks where there is a central marketplace with all orders processed like the NYSE. Forex is a product quoted by all the major banks, and not all banks will have the exact same price. Now, the broker platforms take all theses feeds from the different banks and the quotes we see from our broker are an approximate average of them. It’s the broker who is effectively transacting the trade and taking the other side of it…they ‘make the market’ for you. When you buy a currency pair…your broker is selling it to you, not ‘another trader’. • A brief history of the Forex market.

Ok, I admit, this part is going to be a little bit boring, but it’s important to have some basic background knowledge of the history of the Forex market so that you know a little bit about why it exists and how it got here. So here is the history of the Forex market in a nutshell: In 1876, something called the gold exchange standard was implemented. Basically it said that all paper currency had to be backed by solid gold; the idea here was to stabilize world currencies by pegging them to the price of gold. It was a good idea in theory, but in reality it created boom-bust patterns which ultimately led to the demise of the gold standard. The gold standard was dropped around the beginning of World War 2 as major European countries did not have enough gold to support all the currency they were printing to pay for large military projects. Although the gold standard was ultimately dropped, the precious metal never lost its spot as the ultimate form of monetary value. The world then decided to have fixed exchange rates that resulted in the U. S. dollar being the primary reserve currency and that it would be the only currency backed by gold, this is known as the ‘Bretton Woods System’ and it happened in 1944 (I know you super excited to know that). In 1971 the U. S. declared that it would no longer exchange gold for U. S. dollars that were held in foreign reserves, this marked the end of the Bretton Woods System. It was this break down of the Bretton Woods System that ultimately led to the mostly global acceptance of floating foreign exchange rates in 1976. This was effectively the “birth” of the current foreign currency exchange market, although it did not become widely electronically traded until about the mid 1990s. (OK! Now let’s move on to some more entertaining topics!)… What is Forex Trading? Forex trading as it relates to retail traders (like you and I) is the speculation on the price of one currency against another. For example, if you think the euro is going to rise against the U. S. dollar, you can buy the EURUSD currency pair low and then (hopefully) sell it at a higher price to make a profit.

Of course, if you buy the euro against the dollar (EURUSD), and the U. S. dollar strengthens, you will then be in a losing position. So, it’s important to be aware of the risk involved in trading Forex, and not only the reward. • Why is the Forex market so popular? Being a Forex trader offers the most amazing potential lifestyle of any profession in the world. It’s not easy to get there, but if you are determined and disciplined, you can make it happen. Here’s a quick list of skills you will need to reach your goals in the Forex market: Ability – to take a loss without becoming emotional. Confidence – to believe in yourself and your trading strategy, and to have no fear. Dedication – to becoming the best Forex trader you can be. Discipline – to remain calm and unemotional in a realm of constant temptation (the market) Flexibility – to trade changing market conditions successfully. Focus – to stay concentrated on your trading plan and to not stray off course. Logic – to look at the market from an objective and straight forward perspective. Organization – to forge and reinforce positive trading habits. Patience – to wait for only the highest-probability trading strategies according to your plan. Realism – to not think you are going to get rich quick and understand the reality of the market and trading. Savvy – to take advantage of your trading edge when it arises and be aware of what is happening in the market at all times. Self-control – to not over-trade and over-leverage your trading account.

As traders, we can take advantage of the high leverage and volatility of the Forex market by learning and mastering and effective Forex trading strategy, building an effective trading plan around that strategy, and following it with ice-cold discipline. Money management is key here; leverage is a double-edged sword and can make you a lot of money fast or lose you a lot of money fast. The key to money management in Forex trading is to always know the exact dollar amount you have at risk before entering a trade and be TOTALLY OK with losing that amount of money, because any one trade could be a loser. More on money management later in the course. • Who trades Forex and why? Banks – The interbank market allows for both the majority of commercial Forex transactions and large amounts of speculative trading each day. Some large banks will trade billions of dollars, daily. Sometimes this trading is done on behalf of customers, however much is done by proprietary traders who are trading for the bank’s own account. Companies – Companies need to use the foreign exchange market to pay for goods and services from foreign countries and also to sell goods or services in foreign countries. An important part of the daily Forex market activity comes from companies looking to exchange currency in order to transact in other countries. Governments Central banks – A country’s central bank can play an important role in the foreign exchange markets. They can cause an increase or decrease in the value of their nation’s currency by trying to control money supply, inflation, and (or) interest rates. They can use their substantial foreign exchange reserves to try and stabilize the market. Hedge funds – Somewhere around 70 to 90% of all foreign exchange transactions are speculative in nature. This means, the person or institutions that bought or sold the currency has no plan of actually taking delivery of the currency; instead, the transaction was executed with sole intention of speculating on the price movement of that particular currency.

Retail speculators (you and I) are small cheese compared to the big hedge funds that control and speculate with billions of dollars of equity each day in the currency markets. Individuals – If you have ever traveled to a different country and exchanged your money into a different currency at the airport or bank, you have already participated in the foreign currency exchange market. Investors – Investment firms who manage large portfolios for their clients use the Fx market to facilitate transactions in foreign securities. For example, an investment manager controlling an international equity portfolio needs to use the Forex market to purchase and sell several currency pairs in order to pay for foreign securities they want to purchase. Retail Forex traders – Finally, we come to retail Forex traders (you and I). The retail Forex trading industry is growing everyday with the advent of Forex trading platforms and their ease of accessibility on the internet. Retail Forex traders access the market indirectly either through a broker or a bank. There are two main types of retail Forex brokers that provide us with the ability to speculate on the currency market: brokers and dealers. Brokers work as an agent for the trader by trying to find the best price in the market and executing on behalf of the customer. For this, they charge a commission on top of the price obtained in the market. Dealers are also called market makers because they ‘make the market’ for the trader and act as the counter-party to their transactions, they quote a price they are willing to deal at and are compensated through the spread, which is the difference between the buy and sell price (more on this later). Advantages of Trading the Forex Market: • Forex is the largest market in the world, with daily volumes exceeding $3 trillion per day. This means dense liquidity which makes it easy to get in and out of positions. • Trade whenever you want: There is no opening bell in the Forex market. You can enter or exit a trade whenever you want from Sunday around 5pm EST to Friday around 4pm EST. • Ease of access: You can fund your trading account with as little as $250 at many retail brokers and begin trading the same day in some cases. Straight through order execution allows you to trade at the click of a mouse. • Fewer currency pairs to focus on, instead of getting lost trying to analyze thousands of stocks.

• Freedom to trade anywhere in the world with the only requirements being a laptop and internet connection. • Commission-free trading with many retail market-makers and overall lower transaction costs than stocks and commodities. • Volatility allows traders to profit in any market condition and provides for high-probability weekly trading opportunities. Also, there is no structural market bias like the long bias of the stock market, so traders have equal opportunity to profit in rising or falling markets. While the forex market is clearly a great market to trade, I would note to all beginners that trading carries both the potential for reward and risk. Many people come into the markets thinking only about the reward and ignoring the risks involved, this is the fastest way to lose all of your trading account money. If you want to get started trading the Fx market on the right track, it’s critical that you are aware of and accept the fact that you could lose on any given trade you take. What is the Forex Market. The foreign exchange market, also called forex or FX for short, is the biggest financial market in the world, with a daily turnover of around $5 trillion — that is $5,000 billion in a single day! It dwarfs all other markets by size and is one of the most exciting markets for investors.

The main participants in the forex market are large banks and other institutional investors, but with technological innovation in the last 20 years, the market became accessible for smaller retail investors as well. Today, all you need to participate in this exciting market brimming with money making opportunities is a computer with internet access, a broker account which you open online, and this forex tutorial , which will cover all the basics to start trading. Major World Currency Pairs. As you probably already assumed from the name, the foreign exchange market is where traders go to trade the world’s currencies. There are many currencies around, but just a few are considered the major currencies. Namely, there are eight most traded currencies in the forex market. These are: U. S. dollar (USD) British pound (GBP) Euro (EUR) Japanese yen (JPY) Swiss franc (CHF) Australian dollar (AUD) New Zealand dollar (NZD) Canadian dollar (CAD) As you can notice, all the listed currencies are from developed economies, as they make up the highest share of the world trade, which makes their currencies the most traded in the world. Simply said, like in all other markets, the traders in the forex market try to buy a currency cheap and sell it later at a higher price. But, what’s unique about the forex market, (and the reason why so many traders decide to invest in it) is it’s also possible to make a profit when the price goes down – we will explain this later. For now, let’s focus on the process of the actual buying of currencies in the forex market. Currency Pairs. You have probably already noticed that all currencies are quoted in currency pairs. That is, the quote represents the price of one currency in the second currency. These are called the base currency, and the counter currency. For example, a quote of EURUSD of 1.10 means that 1 euro buys 1.10 U. S. dollars.

Here, the euro (EUR) is the base currency, and the U. S. dollar represents the counter currency. A rise of the quote of EURUSD to 1.20, means that now 1 euro buys 1.20 U. S. dollars. In this situation, the euro became stronger and the dollar weaker. The goal of a forex trader is to anticipate the rise (or fall) of a currency’s value, in order to buy or sell that currency. In the mentioned example, a forex trader would like to buy the euro for $1.10, and then sell it for $1.20. Usually, currency pairs don’t fluctuate that much. Most pairs move less than 1% daily, making forex one of the least volatile financial markets. On the other side, liquidity is extremely deep. If you decide to buy or sell currency, it will take you milliseconds to do so. That’s why relatively high leverage is available on forex, which increases the value of potential gains from small movements but also increases the risk of higher losses. No Centralized Trading Locations. Forex is an over-the-counter market, with no centralized location for trading currencies. Instead, currencies are traded in financial centers around the world, like New York, London, Frankfurt, Tokyo, and Sydney. This means, the market is open 24-hours a day, and you can trade around the clock. This is perfect for those looking to trade after your day-job, or before going to sleep!

A market will always be open somewhere – in North America, Europe, Asia or Australia.



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  • Forex is an over the counter market which means