9/1/2017 Whatisthecurrencymarket?

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Hi,Haldir870
Whatisthecurrencymarket?

Introductiontothecurrencymarket
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Althoughwemaynotbeawareofit,thecurrencymarkethasadeepimpactonoureveryda
(!)
fromthemostobviouscurrencyexchangewehavetodowhenvisitingaforeigncountry,toth
Jurij'sCorner
Youarereallyready.!!!!!!!^:)^Great!!!!!!My ourgoodspricesandsometimesevensalariesfluctuateduetothevarianceofvalueofour

contrats.Nowonlyforward! currenciesrelativetothoseofforeigncountrieswithwhichwedobusiness.Eventhemoney
InMembers'Journals/Journals yourmattressiscontinuallychanginginvalue!
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newjournal
anothertryonAJ[attachment]H4S/R+M30
Whatisthecurrencymarket?
supply+FO+CP?cangodrop?[attachment]
Wedefineamarketasaplacewherepeoplecouldmeeteachotherforbuyingorsellingthings,betheytangiblelikeinafo
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market,orvirtuallikewebsitessuchaseBay.
newjournal
gbpnzdCPliquidtowhere..needtimeapproachon ThereareintheworldsomewellestablishedfinancialmarketslikethephysicallylocatedNewYorkStockExchange(NYS
thisone..waitingataroundNYormaybetomorrow
theChicagoMercantileExchange(CME),orelectronicbasedmarketslikeNASDAQ.Inthesemarketstradersareableto
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exchangeshares,commodities,bonds,orcurrencies.Onthecurrencymarket,alsoknownasforexmarket,buyersands
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haveaplacetoexchangeDollars,Euros,Pounds,Yen,etc.
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planningAJagainwaitingatH4lvshortopportunity
comesbackaroundLO[attachment][attachment]
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wow,congratsJurij,reallyhappyforyou,well
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If
Quote:HiyaFromtheinformationprovided,it'sthe
upperone.Thishasbeenexplainedmanytimes
sorrysirformysillyquestion.becauseisawthishighreact
atoneplaceoftwoboxs.whynotthegreenone?itsavalid
FTRtooright.imjustnoideathereasonbehindit.#:S
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InMembers'Journals/Journals Butwhyisthereaneedforaforeignexchangemarket?Theforexmarketisanimportanttoolforallowingbusinesstrans
(!)
Jurij'sCorner bedonebetweendifferentcurrencies.Imagine,forexample,theChinesemanufacturerwhohasanorderoftenthousandt
Nomorecooperandrust,applause! fromaeuropeanwholesaler.TheChinesemanufacturer,mostprobablywillwanttobepaidonUSdollarsfromtheEuropea
InMembers'Journals/Journals
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wholesaler,whowillhavetochangeitseurostoUSdollarstopaytheChinesemanufacturer.AtthesametimetheChinese
Jurij'sCorner manufacturerwillneedtobuycottononthecottonmarket,tradedinUSdollars.Intheend,thismanufacturerprobablywill
Jurij,congratsonyourpromotion,verywelldeserved changetheUSdollarsofprofittoChineseyuans,tospenditongoodsandsalariesinChina,ormaybeheorsheisthinkin
:) openingabusinessonEngland,sowillchangesomeofhisUSdollarstoBritishpounds.Withoutacurrencymarket,none
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thesetransactionscouldbemadefairly.Havingafreemarketwherethousandsofparticipantscoulddecideonthevalueo
MoreTopics assetisthemostlogicalandfairwaytogiveanythingavalue.

Theforeignexchangemarketprovidesthemachineryformakinginternationalpayments,fortransferringpurchasingp
fromonecurrencytoanother,andensuringthattherelativevalueofeachcurrencyisclearanduniversal.

TheForeignExchangegrowth

TherewereevenmoneychangersinAncientGreece,buttheforeignexchangeasweknowithasevolvedalotsincethen.
the1970's,deepstructuralchangeshaveoccurredintheworldfinancialsystemandeconomy:

Achangeintheinternationalmonetarysystem,fromthefixedexchangeratespecifiedontheBrettonWoodsagreeme
thefloatingexchangeratesintheearly70s'tilourdays
Financialderegulationthroughtheworld,resultinginhigherfreedomforfinancialtransactionsandincreasedcompet
amongfinancialinstitutions.
Internationaltradeliberalization,withinmultilateraltradeagreements.Enormousexpansionofinternationalcapital
transactions.

http://www.readthemarket.com/index.php/en/178englishrtm/415whatisthecurrencymarket 1/4
9/1/2017 Whatisthecurrencymarket?
Hugeadvancesintechnology,allowinginstantaneoustransmissionofmarketinformation,andfastandreliableexec
financialtransactions.
Thedevelopementofnewfinancialinstrumentsandadvancesintheunderstandingofthefinancialsystem.

Alloftheseprovidefertilegroundfordevelopmentinforeignexchangetrading.

Inthefirstdecadeofthe21stcentury,thegreattechnologicaladvancesininternetbasedtradinghaveenabledthesmallr
tradereasyaccesstotheforexmarket,traditionallythedomainofglobalbanks.

Whoaretheparticipants?

Becauseyouwilltradewith(orperhapsagainst)them,it'svery
importanttoknowwhoaretheplayersinthecurrencymarket:

Onthetopofthehierarchythereareagroupofmajorbankswhose
tradesmassivelyaffectexchangerates.Theyareconnectedforthis
tradingthroughtwoelectronicservices,EBSandReutersDealing.
Thesebanksformanetworkknownastheinterbankmarket,which
isthecenteroftheForexMarket,andfromwhereisderivedthe
exchangeratesyourdealeroffersyou.Thesemajorbankstradefor
costumers,butalsoforthebanks'ownaccounts(whatisknownas
propietarydesks,orjust"propdesks").

GovernmentsandCentralBanksarespecialkindofparticipants,as
theycausechangesontheexchangeratespricesduetotheirmonetaryorfiscalpolicy,especiallywithinterestrate

DealersandBrokersprovideclientsaccesstotheforexmarket,chargingthemapartofthespread,acommision
Theymaketheirprofitsthroughthesecharges,butveryoftenalsomaintainpositionsagainsttheirowncostumers.Inthew
cases,theyalsoprofitfromcheatingthecostumers,shadingtheprice,spikingzonestorunorders,orusingrequotesorsl
whentherewasnorealslippageoftheprice.Thesepractisesarethereasonmanypeopleprefertotradejustonregulated
markets,andwhyyoushouldbecarefulwhenchoosingadealer.

Thedifferencebetweendealersandbrokersisthatbrokersjustgiveyouaccesstotheinterbankmarket(tosomeoftheba
theyworkwithactingforthemasliquidityproviders),sendingyourordertothemarket,whiledealersdon'tsendyourord
themarket,butgiveyoucounterpart.HaveinmindthatmanysocalledECNbrokersusethisdenominationmainlyforadv
purposes,butwillgiveyoualsocounterpartunlessyourorders(orthesumofvariouscustomerorders)reachtheminimum
acceptableintheinterbank,10lotsor1millionunits.

Therestoftheparticipantsintheforexmarketgenerallycouldbeclasifiedontwocategories:financialtransactors
speculators.WhilefinancialtransactorsneedtoparticipateintheFXmarketaspartoftheiroverallbusiness,speculators
itexpresslyforthemoney.

Financialtransactorsmainlyarehedgersandfinancialinvestors.Asfinancialtransactors,corporationsparticipateintheF
markettohedgetheriskofcurrencychangetoprotectbenefits,whilefinancialinvestorsneedtoexchangecurrenciesto
internationalinvestments.Sotheirbusinessisonotherplacesthantheforexmarket,buttheyneedtoservethemselvesf
thismarkettoruntheirbusinessandreducerisks.

Ontheotherside,speculators,whomakesaboutthe90%oftheforexvolume,arethoseparticipantswhoseprimaryaim
obtainprofitsfromtheirviewsonthemarket.HedgeFunds,CTAsorthealreadycitedbank'spropdesksarethebigboy
thiscategory,whilethesmallretailtradersusuallyfindthemselvesatthebottomoftheforexpyramid.

SpotFX

WhenwetalkaboutForextradingusuallywerefertojustonekindofproduct,thespot,whichmeansthatthetradeisdone
thepricewhichistradednow,or"onthespot".Itisthetradeofthecurrentexchangeprice,withasettlementofamaximu
twodays.SpotisthemosttradedproductintheFXmarket,withavolumeof1.5$trillionfromatotalof4$trillionstraded
day,basedonthefiguresofthe2010surveyofTheBankforInternationalSettlements(BIS),theinternationalsupervisorf
banksaroundtheworld.Itopposesotherforexinstrumentslikeforwardsorswapsinthatintheseproductsthesettlements
placeonanypreagreeddatethreeormorebusinessdaysafterthedealdate.

ApartfromtheseOverTheCounter(OTC)products,wecouldfindtwoForexproductsinorganizedexchanges:currencyf
andcurrencyoptions.

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9/1/2017 Whatisthecurrencymarket?
MaincharacteristicsoftheForexmarket

WhywouldyouliketotradeonFX?Theforexmarkethassomecharacteristicsthatmakeitveryattractivefortraders,like
liquidity,lowtradingcosts,orthechancetotradeatanyhour.

Firstofall,theForexmarketisanunregulatedmarket,alsoknownasOTC(
thecounter).Beingunregulatedmeansthatithasnotacentralmarketnorregu
thatdictatespricesandrules,butinsteadisformedbyanumberofbanksand
dealersthatpermitthetradingbetweenparticipants,allowingeachbankordea
decideitsownprices.
Formanypeoplethisisthemaindisadvantageoftheforexmarket,becauseo
dealers'opportunitytomanipulateprices.But,atthesametime,thisunregulat
createscompetitivitybetweenthedealersforofferingtighterspreadsandbette
service.

Anyway,beingaregulatedmarketdoesn'tmeanbeingfreeofpricemanipulatio
justmeansthatthemanipulationcanonlybedonebytheregulatorofthemark
theCMEonthefuturemarkets,havingthemonopolyofthemarketrules,and
abletochangethematanymoment.

Becauseit'sanonregulatedmarket,FXdoesn'thaveastrictpredefinedsch
butitispossibletotradeiteverydayateveryhour,avoidingingreatparttheopeninggaprisksoimportantinothermarke
practice,becauseofabigliquiditydropduetotheclosingofbanks,weekendsusedtobenontradeablebecausethereare
nobigmovesandthespreadisverywideduetoverylowliquidity.Also,becausetheirliquidityproviders(thebanks)arec
mostoftheforexbrokersusethistimeforservermaintenance,andclosebetweenthecloseoftheFridayNYsession,and
openoftheWellingtonandSydneyMondaysession.Soit'sbettertotakeadvantageoftheweekendtodisconnectandref
thehead,andtoplanandpreparethenexttradingweek.

Thesesessionsarepracticallydefinedduetotheopenhoursofbanksineverytimezone.It'swidelyconsideredthatthew
startswiththeMondayopeningoftheWellingtonbanksandtherestoftheAsianzones,andcloseswhenNewYorkcloses
Fridayafternoon.Alsothismeansthatwhenbanksareclosed(bankholidays)inazone,liquiditydropsduringthattime.T
sessioninwhichmorevolumeisinvolvedisontheEuropean(orLondon)session,mainlyduetotheoverlapwiththelasth
oftheAsiansession,andtheopeninghoursoftheAmericansession.

AnotherimportantcharacteristicoftheFXmarketisthehugeliquidity,whichpermitslowoperationalcosts.It'susualthat
don'tchargeadirectcommissionthisdoesn'tmeanit'sfreeofcharge,butthiscommissionisincludedinthespreadbetw
bidandaskprice.

TheForexmarketisalsoamarketwithagreatnumberofinstrumentstotrade,soit'spossibletodiversifyandtoscanthe
markettolookforthebestoportunities.Therearefourmajorcurrencypairs(EUR/USD,USD/JPY,GBP/USDandUSD/CH
involvealittlemorethanhalfofalldailytradingvolume.Theminorpairs(USD/CAD,AUD/USDandNZD/USD)completeth
principaltradingpairsthatincludetheU.S.dollar.ThosepairsthatconsistoftwononUSDcurrenciesarecalledcrosscurr
pairs,orcrosses(forexampleEUR/GBP,NZD/JPYorGBP/NOK).

Hopethisarticlehasbeenofhelp,andthanksforreading.

byokami

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LastpostbyKovalenko
Today10:54
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