The Forex Market is the giant of Global Financial Markets and by far the biggest, with it out stripping the Bond, Equity and Commodity Markets.
This is due to the incredible scale of the Forex Market with over US$ 6 trillion traded on a daily basis.
Most tourists would have come across the word ‘foreign exchange’ when they dealt with a bank or bureau de exchange.
Or entrepreneurs who are involved in international commerce could be active in the Forex Market as part of their normal process of importing and exporting goods and services.
Although both tourism and commercial based transactions account for a large amount of foreign exchange transactions the largest percentage by far relates to speculative business.
In fact some 90% of all foreign exchange (also known as FX) business is speculative.
What we mean by this is that an individual or a business will open and close a FX position with a view of generating a profitable outcome.
However this is not always the case and on occasions loss will occur. In both cases wins and losses are represented as debits and credits on an investor’s online account.
As an investor who owns an online trading account Forex Trader never needs to take physical delivery of currency or remit foreign currency.
The reason for this is that an investor will never take possession of the actual physical currency.
Forex is ‘Over the Counter’
The Forex Market is not traded on any global exchange but is described as an over the counter market or in short (OTC).
An OTC market has one major characteristic, that being all transactions take place directly between two parties.
An OTC market lends perfectly adapts to advances in modern technology and is well suited to the internet age.
Investors are therefore able to access this large, dynamic and exciting market from wherever there is reliable internet access.
What makes the Forex Market Unique?
Due to the enormous scale of the Forex Market and the volumes that are traded on a daily basis a great deal of liquidity is created.
Liquidity is a trader’s best friend in any market.
The reason is that, every person or organisation willing to sell a currency has to have a counter-partner looking to purchase that same currency.
High levels of liquidity ensures that buyers and sellers in most cases can find the appropriate match.
Access to all at anytime
At FBS, it is easy and free to open a live trading account.
FBS accepts all respectable payment providers and a new client can be underway and trading in no time at all.
An investor uses leverage to amplify the effect of an open position.
This is achieved by borrowing funds from their broker so as to increase the open exposure.
The majority of equity markets make available leverage levels of 1:2.
Forex Brokers however can typical offer levels of leverage in excess of 1:100 and in some cases 1:3000.
The scale of this leverage allows an investor to capitalize on both small and large moves in the Forex Market.
There is a flip side being that high levels of leverage can also magnify the size of an investor’s loss.
The Forex market never sleeps
The Forex market being off exchange can be traded around the clock. Apart from weekends, 25th December and the 1St January one can trade the Forex Markets day or night.
Daily news releases such as the United States Non-Farm Payrolls, Australian Monetary Policy Meeting Minutes or the German ZEW data will add volatility to the market.
As these major news events are continuously and consistently happening every day or night one could realistically never leave their trading terminal.
Low Cost or Commission Free
On the entry point market making account, FBS will not charge its clients any transaction commission. A
client will see an all in price where cost of doing business is charged as a spread.
The spread is the difference between the price an investor would sell at and the price an investor would buy at.
This is also known as the bid and offer price.
There may be a case where an investor is charged a small fee for hold a position overnight.
This is known as the Swap and relates to interest charged for leveraged positions held overnight.
Guaranteed Risk Management
At times the Forex market can become overly volatile such as the 2015 Swiss Franc event.
An investor is able to manage this risk by placing both automated stop and profit targets.
Furthermore FBS has taken the bold move to guarantee that an investor’s negative open position will never exceed the value of the account equity on deposit.
Who actually trades in the Forex Market?
It always needs two parties to make a market. This will include a buyer and a seller.
There is no difference in the Forex market.
In the Forex Market the buyers and sellers could be individuals, businesses, investment banks, hedge funds, multi-national corporations and government organizations such as Central Banks.
FBS operates and offers their clients two distinct business models under one roof.
This allows the client the freedom to choose a business model that is appropriate and most suitable to a client’s needs.
These well-known business models are the:
Market Making Business Model
In the case of the Retail Forex Market one side of the trade is the investor and the other is FBS being broker of choice.
FBS provides the pricing required to allow the investor to participate in Forex Market activity.
Additionally, FBS operates as a market maker by providing bid and ask pricing to the investors to trade from.
Straight Through Processing Model
In this case FBS provides pricing direct through a well-respected selection of global liquidity providers.
The STP model is also known as the Agency model.
In the STP model, the investor acts as the client through the FBS MT4 trading terminal, and is able to transact on prices quoted directly from the liquidity providers.
In return for acting as the link to the liquidity providers FBS charges a brokerage fee that is calculated on the volume transacted.