The Forex market, as well as what it eats!
In the English-speaking environment Forex currency market is usually called, and currency trading.
In Russian the term Forex is usually used in the narrower sense - I mean extremely speculative currency trading by commercial banks and dealing centers, which is conducted with the use of leverage, ie margin trading currency. More details are described in the sections "Currency market participants" and "Forex as a means of making a profit."
Operations in the Forex market on the objectives may be trademarks, speculation, hedging, regulatory (foreign exchange intervention of central banks).
Daily turnover
It is believed that the daily turnover in the forex market was as follows: 1977 - $ 5 billion in 1987 - $ 600 billion at the end of 1992 - $ 1 trillion in 1997 - $ 1.2 trillion in 2000 - $ 1.5 trillion in 2005-2006, the volume of daily turnover on the FOREX market fluctuated, according to various estimates, from 2 to 4 trillion in 2010 - $ 4 trillion. In this case, a further increase in intraday turnover to $ 10 trillion in 2020.
The BIS conducts periodic large-scale study of the Forex market every three years, starting in 1989. The final report contains information on the turnover of the market, the structure and dynamics. The last report was released in December 2010 and is available on the official website.
However, no accurate data as it is the OTC market, and there is no requirement of compulsory registration and publication of trades. Part of this volume provides a margin trading, under which contracts are allowed for amounts significantly exceeding actual capital transaction participant. Regardless of the nature and purpose of transactions, large daily turnover is a guarantee of high liquidity of the market.
Currency market participants
Forex is the foreign exchange market. Operations are carried out through a system of institutions: central banks, commercial banks, investment banks, brokers and dealers, pension funds, insurance companies, multinational corporations, etc. Volume of one contract with real currency delivery at the second working day (spot market) is usually about 5 million U.S. dollars or its equivalent. The conversion price of one payment is from 60 to 300 dollars. In addition, have to bear the cost of up to 6 thousand dollars a month for interbank informational trading terminal. Because of these conditions, the Forex market is not carried out direct conversion of small amounts. To do this, cheaper to apply to financial intermediary (bank or exchange broker), who will make the conversion for a certain percentage of the transaction amount. With a large number of clients and countervailing applications from intermediaries regularly arise situations of internal clearing (brokerage "kitchen"), because of what is not always necessary to carry out the conversion in real trading. But they get their commissions from clients at all times. It is because of the fact that the Forex does not fall all the client application, resellers can offer customers a commission that significantly lower than the cost of direct operations on Forex. At the same time, if you eliminate intermediaries, the cost of converting to the end client is bound to increase.
Current currency rates are used for a large number of operations that do not necessarily have direct access to Forex. An example is the change of the national currency the state bank, which has to preserve the aspect ratio between the foreign exchange rate in accordance with their proportions on Forex even if the real supply / demand in the country is not consistent with the trends in the Forex market. For example, if the domestic market there is excess supply of euros, but in forex price euro against the dollar increases, the central bank will have to raise the price as well, and not to reduce the pressure of excess supply.
Another striking example - the marginal speculative currency trading, which is focused on fixing the current forex quotes, but by its terms is not the actual delivery. Almost all the intermediaries on currency market offer customers not only services for direct conversion, but speculative trading with leverage. In most cases, fees for such transactions is lower than for direct conversion, because of scale and short transactions need real conclusion of contracts for the delivery occurs less frequently. Very often take the form of commissions spread - fixed difference between the purchase price and sale price currency at the same time. In most cases between Forex and speculator built a chain of several intermediaries, each of which takes a commission.
Margin Transactions can (but do not necessarily) to the emergence of a real additional demand or supply in the foreign exchange market, especially in the short period of time. But the overall trend movements in exchange rates, they do not form.
Recently begun to receive Forex spread trading system aimed at reducing the impact of the broker (Electronic Communication Network, ECN).
Forex trading as a means of making a profit
The trader specifies the order in the terminal
In RuNet term Forex is not usually called a system of exchange rates in general, but only marginal speculative trading by commercial banks and dealing centers. In most cases, the division is between "Exchange Rates" and "Margin trading" even on courses. Simply talk about Forex, but by using the word Forex is almost always implied margin trading in the forex market.
The ads often heard the call "to earn on Forex." Should consider multiple meanings of the term "earn". On the one hand, it's getting paid for their work, paid work. On the other hand, it is generating income, including - profit. Paid work with the agreed remuneration system is the broker of the brokerage company. But in advertising, it is not generally understood, and personal margin trading, without employment and without an agreed wage. This is the kind of business, profit-oriented, with its start-up capital and the inevitable risks.
Individuals working through intermediaries ... Forex ... a risk. And the reason is not so much cheating brokers as an intrinsic property of the Forex market.
Margin trading is a form of business has some specific features: does not require much start-up capital, no superiors and subordinates, no competition for suppliers and consumers, the same type of operations that do not require the constant development of new techniques or skills, very large potential yield in combination with high risk of loss. These features make the margin trading attractive to start stock trading at a small start-up capital.
Most brokers will provide an opportunity to see with your own eyes and try on a demo account with virtual money. But to obtain the "results" must be treated very carefully and critically. Many newcomers while they see only what the target themselves. Failures are quickly forgotten: after all I'm an inexperienced rookie, and virtual money - "not lose Audi." Successes are inspiring and well remembered: even a novice so quickly "get rich", everything is so simple that you can at least begin to make a profit tomorrow.
Any business is always contains a one-time opportunity to make a profit by accident. That profits were not from time to time, but regularly and naturally requires an understanding of how specific a specific type of business and economic laws in general. Only by proper currency trading and restrictions on the level of risk is comparable to any other speculative trading, including the stock and commodity markets. But then it will inevitably yield decreased to similar levels. Statistics show that in the long term profits are about 10-15 percent of traders.
Forex is not a currency exchange or other official trading platform with clear rules and operating time. Traded currency (unlike stocks, notes, bonds) are not independent of return, which was not related to the exchange rate fluctuations on the foreign exchange market. It is not possible to calculate the future price of the currency on the basis of regular income or dividends, as is done in the stock market. However, there is the possibility of a positive income from the swap. But the guaranteed yield of 3.1 points per day (about 10-30 dollars with a contract worth 100,000) is not comparable to the risk of currency movements in the money-losing 100-300 points a day (about 1000-3000 dollars for a contract worth $ 100 ' 000). Due to the lack of profitability of independent phrases about "investing in the Forex market" have a different meaning than "investing in stocks." Investing in the Forex involve funds for personal trading or transfer in trust to another trader. The nature of the trade itself has no value. Investing in the stock market also involves buying shares (or "portfolio" of shares) for the long term in order to receive dividends and / or increase the value of the shares (assuming general trend of increasing shareholder value in the long term).
Risks
The use of leverage not only leads to an increase in profitability of operations, an increase in the rate of increase of capital, but also to a proportional increase in the risk of multiple losses and an increase in the rate of loss.
To currency simultaneously affects a lot of conflicting and countervailing factors. Random temporary imbalance of the forces can lead to significant price movements, which are difficult to predict, but that may have a material effect on the result of speculative trading, especially when using high leverage.
In addition to the risks associated with market price fluctuations, it is necessary to take into account the risks associated with the activity of specific broker: There may be significant changes in prices fast with an equally quick return to the original state, which is not confirmed by independent sources of quotations.
In 2007, the U.S. Commission on futures trade in goods (CFTC), the U.S. regulator of the currency market, noted the increase in cases of fraud in the industry of non-bank currency trading. Moreover, the main object of fraud is a private trader. Russia does not have control of the currency market, but much higher levels of fraud. Problematic issues could be a mechanism to handle orders for transactions at predetermined prices (order processing), which fails to guarantee the execution of the order. In bankruptcy broker his clients often can not get their funds from your account.
Sometimes fraud dealing centers are prosecuted. In the U.S., the courts equate to fraud "promise permanent income, non-disclosure of risk information for traders, the assignment of non-existent titles and permits" and achieve closure of offending companies, compensation, compensation. Even in offshore areas because of the "threat to the national security of the country and the protection of its reputation as a center for financial services", some unscrupulous brokers suspend licenses.
Most often scams occur in trust management of Forex. The Civil Code of the Russian Federation in the art. 1013 does not allow the asset management exclusively in cash. Due to the lack of reliable information and legal regulation becomes possible to easily manipulate the money entrusted to the administration. Today, many trading platforms have a special tool for giving the owner the possibility of foreign money continuous monitoring of accounts, which are held in trust trader, which reduces the possibility of fraud, but not reduce the legal issues in dispute.
To currency simultaneously affects a lot of conflicting and countervailing factors. Random temporary imbalance of the forces can lead to significant price movements, which are difficult to predict, but that may have a material effect on the result of speculative trading, especially when using high leverage.
In addition to the risks associated with market price fluctuations, it is necessary to take into account the risks associated with the activity of specific broker: There may be significant changes in prices fast with an equally quick return to the original state, which is not confirmed by independent sources of quotations.
In 2007, the U.S. Commission on futures trade in goods (CFTC), the U.S. regulator of the currency market, noted the increase in cases of fraud in the industry of non-bank currency trading. Moreover, the main object of fraud is a private trader. Russia does not have control of the currency market, but much higher levels of fraud. Problematic issues could be a mechanism to handle orders for transactions at predetermined prices (order processing), which fails to guarantee the execution of the order. In bankruptcy broker his clients often can not get their funds from your account.
Sometimes fraud dealing centers are prosecuted. In the U.S., the courts equate to fraud "promise permanent income, non-disclosure of risk information for traders, the assignment of non-existent titles and permits" and achieve closure of offending companies, compensation, compensation. Even in offshore areas because of the "threat to the national security of the country and the protection of its reputation as a center for financial services", some unscrupulous brokers suspend licenses.
Most often scams occur in trust management of Forex. The Civil Code of the Russian Federation in the art. 1013 does not allow the asset management exclusively in cash. Due to the lack of reliable information and legal regulation becomes possible to easily manipulate the money entrusted to the administration. Today, many trading platforms have a special tool for giving the owner the possibility of foreign money continuous monitoring of accounts, which are held in trust trader, which reduces the possibility of fraud, but not reduce the legal issues in dispute.
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