The Forex Market is by far one of the largest and most liquid financial markets globally, with its millions of forex traders logging in and trading every day. Decades of changes and regulation changes or advertising have contributed to the popularity of the foreign exchange market. There are new people trying out this forex trading everyday in hopes of becoming financially secure. It’s easy because it gives the trader the luxury of “easy money” if you know what you’re doing and understands behind the scenes of Forex, doing so will increase your chances of profits when doing forex trading.
This article will discuss facts about the forex markets but before we do, let’s have an overview of the forex market.
What is The Forex Market?
It’s the largest market for trading currencies, and it’s completely decentralized. No bank or government controls the price of a currency—instead, traders buy and sell currencies using bank wires, reputable online banks (including BTCX – formerly known as Bitcoin Bank), digital currency exchanges, and over-the-counter (OTC) trading services. Buy and sell services include exchanging dollars for other currencies using PayPal, Amazon Gift Cards, Apple iTunes & Google Play Store money transfer, etc.
The Forex market exists in two forms: The Interbank and over-the-counter (OTC).
The term “over the counter” or “OTC” refers to a market that is not carried on a regulated exchange. Therefore the prices and volumes are not regulated either. Usually, when two parties wish to trade, they will contact a broker or an agent who will facilitate the transaction. Imagine if you could buy and sell currencies like trading in the open market; this is what OTC trading is all about.
What is an Interbank In Forex? An interbank exchange is the commercial transaction process between two financial institutions, usually big banks, that involves borrowing and lending money for a specific purpose. The objective is to provide customers with funds that are acceptable at today’s exchange rate plus interest.
As mentioned above, the forex market in nature is decentralized. The non-regulated risk of online trading is enormous. With virtually no regulation, you have no way of knowing what you’re getting into. You could be exposing your entire financial life to someone else—your family, your business, your assets. So, is it possible to make money in the Forex industry without regulation? It is possible, but it will require some very careful thought and decision-making by the trader. The non-regulated nature of Forex trading means that there is a risk that any trader could disappear with your money, often followed by a public scandal involving stolen funds or illegal activities. As a result, most traders limit their exposure to counterparty risk by limiting their outbound trading activity to reputable exchanges where there is adequate regulation in place.
The purpose of the regulated market is to ensure fair and ethical business behavior by the participants. The participants in this market are banks, brokers, investment firms, economists, and other experts that provide financial services for account holders and clients. They carry out their activities in full compliance with all relevant laws and regulations.
The regulated market in forex itself is regulated by self-regulatory organizations or organizations independent from one another. Each organization sets its own rules and standards for itself. These organizations are authorized to carry out examinations on behalf of the Independent Anti Money Laundering Commission (IOMLC), the Financial Conduct Authority (FCA), and other national regulators. These organizations inspect organizations and verify they comply with applicable legislation, that all information provided by an organization is correct, and that there are no instances of money laundering or other criminal activity conducted through the organization.
To summarize, non-regulated or regulated forex markets have their ups and downs. One favors some traders more than the other. Non-regulated forex markets are more prone to hackers and fraud, but the freedom to trade whatever you want while regulated is more secure but less freedom than non-regulated. This is why you must understand the forex market, so you know how to plan out your trades and increase your profit in forex trading; keep doing this trend of widening your knowledge of forex, and indeed, you’ll become a successful trader.