Why Forex Market is Unique?
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.
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.
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.
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