Dear All,
Today, I start a thread about FX Currencies & Markets.
And Members in this Place can use for :
The first thing... need to know in order to understand how the 'Foreign Exchange market' actually works is that this market in descentralized. That is an essential feature that differentiates between the Forex Market and other Markets, like Stock Exchange for example.
The Forex Market is an unregulated Global Market that doesn’t have a physical address where all the Trading takes place, like New York Stock Exchange (NYSE) in the case of the Stock Market.
The Upper layer - most important players in the market (they can change a trend, they establish exchange rates, their exchanges account for most of the traded value)
1. The main players of this market are some very large banks, the largest in the world, that account for most of the daily traded volumes, estimated at almost 4 trillion dollars by the Bank of International Settlements (BIS).
These banks form the Interbank Market, a group inaccessible by retail traders, that practically set the trend for the market. Because of the huge volumes they trade (one single bank can trade even billions of dollars in one day) in their own name or in the name of their customers, the spreads are very tight.
The trade is based on credit relationships the banks have established one with the other – a bank will be able to access another bank’s offered rate only if the two have a specific credit relationship.
These banks use the Electronic Brokering Services (EBS) or the Reuters Dealing for trading, two platforms that compete for this market. The main difference between the two is that some pairs are more liquid on one platform than on the other.
2. A very important player in the Forex Market is represented by the Central Banks and the Governments.
They are some of the most influential participants and are regularly involved in the market for their international trade payments or to adjust their reserve volumes. Central Banks intervine in the market indirectly, by affecting money supply (decreasing the amount of money will increase the Currency’s value and Vice Versa), or directly, by buying or selling operations that alter Exchange Rates.
The Middle layer – second most important players in the market (their transactions are made via Commercial Banks, which increases rates and makes the Foreign Exchange more expensive than on the Interbank Market)
3. Commercial Companies, Investment Management Firms and Hedgers
Large Companies that make aquisitions from abroad need money in order to buy those products. They place such orders through Banks and, although these trades don’t affect directly and immediately the Forex Market, during time their impact is seen. Also, International mergers and aquisitions require also Currency Exchange, which affects the Market.
Another important segment of the Foreign Exchange market is represented by the investment management firms that manage the accounts of pension funds or insurance companies, for example, and use the Forex market to buy currencies needed in foreign securities transactions or in a pure speculative operation.
Hedging refers to covering the risk of currency devaluation. For example, let’s imagine the US company X that makes computers and orders Japanese technology that has to be paid for one year from now. But in one year, it might become much more expensive to buy Japanese yen with US dollars than it is right now, so the company X wants to cover its risk by buying the Currency at this moment. As it doesn’t have or doesn’t want to spend the respective amount of money at this moment, the company X enters a hedging contract that allows it to lock the Exhange rate.
4. Retail Forex Brokers
These type of entities are the ones through which retail Foreign Exchange actually takes place. Retail Forex brokers form the bridge between the small speculators, the retail traders, and the Interbank Market. Before they appeared, mainly thanks to the technological development and the internet, the Interbank Market was accessible only to Big speculators and investment funds. Retail Forex Brokers are of two types, which will be discussed in a further lesson in detail: Electronic Communication Networks (ECN’s) and Market Makers. The main difference between the two of them is the way the prices they offer are formed.
The Lower layer – these are the small speculators that access the market through retail Forex brokers
5. Retail Traders
The Last layer of the Foreign Exchange market is represented by the retail traders. This is you, interested in making a small profit out of trading currencies through brokers. It might seem a small and insignificant group, but these small trades put all together make about 10% of spot Forex turnover, respectively 150 billion dollar every day, according to the latest figures.
In the end let’s have a look at a figure with All the Market’s participants and how they interact :
http://blog.fxstat.com/wp-content/up.../structure.png
The volume negotiated is particularly focused in London, but also in New York and Tokyo.
These cities are also Major trading and decision Centers for Monetary matters because of their sheer size in turnover, and number market participants also because the happenings in these places tend to influence other dealing centers around the World. Other important locations at this level are Sydney, Switzerland, Frankfurt, Singapore and Hong Kong.
Many of today's MajorCcurrencies fluctuate freely between each others and are negotiable virtually throughout the world. This has resulted in increased speculation by banks, hedge funds, brokers and individuals. Central Banks occasionally intervene with the intention to move the Currency towards desired levels, however, the underlying factor that leads the Forex Market are the forces of supply and demand.
The lack of physical change enables the Exchange Market to operate 24 hours a day, 5 days a week, covering different areas across the most important financial centers. Its tremendous volume of transaction makes it very liquid and therefore highly desirable to trade. Currencies are the most traded assets in the World - any Commercial or Financial flow across borders may involve a Currency Exchange.
http://www.migbank.com/%7E/media/MIG...es/mod1-1.ashx
Map with the different trading sessions times frames (GMT is Greenwich Mean Time, EST is Eastern Standard Time)
At this point it's interesting to note that the trading activity of each financial center will determine the behavior of the market.
Thus when the London markets open and the session starts, it's still overlapped with the last two hours of activity in Tokyo. Position openings done by London traders and the closure of positions in Tokyo coinciding in a interval of two hours may explain the increase in activity and volatility around this time. Later the European and the US session match during 4 hours in a combination of players, significantly increasing liquidity.
Edge Box - Price Actions like breaks of previous high or low levels and Intraday trends are usually more significant at the start of the London session and during the overlapping period of the European and American sessions. At the end of the American session and during the Asian session, be careful since lower volume conditions may result in false breakouts and false technical signals.
Link Box - It's worth mentioning the importance for the Retail Trader to be aware of the most recent leading center's Trading activity. This applies not only to Market activity, such as the announcement of economic data, but also inactivity. So if these centers are together or separately on holiday, do not be surprised when trading tends to go quiet. Hence it's a good idea to check the Economic Calendar for major International holidays when doing your market research and planning particular trades.
INFO & RESOURCES (Added February 17, 2014)
A. Foreign Exchange Resources
1. Foreign Exchange
2. Forex Magnates
3. e-forex
B. FX Broker Directory
1. Forex Church
2. Forex Brokerz
C. Library
1. Currency Codes
All the Best,
Tsar
Today, I start a thread about FX Currencies & Markets.
And Members in this Place can use for :
- Trade and Technical Analysis [TA] All of the FX CURRENCIES with own Trading Style's.
- Talk, Discussion, Share the Information & knowledge FX CURRENCY
- Opinion, Analysis, Estimate & Outlook about MARKETS
QuoteDislikedForex Markets Structure and Particippants
The first thing... need to know in order to understand how the 'Foreign Exchange market' actually works is that this market in descentralized. That is an essential feature that differentiates between the Forex Market and other Markets, like Stock Exchange for example.
The Forex Market is an unregulated Global Market that doesn’t have a physical address where all the Trading takes place, like New York Stock Exchange (NYSE) in the case of the Stock Market.
The Upper layer - most important players in the market (they can change a trend, they establish exchange rates, their exchanges account for most of the traded value)
1. The main players of this market are some very large banks, the largest in the world, that account for most of the daily traded volumes, estimated at almost 4 trillion dollars by the Bank of International Settlements (BIS).
These banks form the Interbank Market, a group inaccessible by retail traders, that practically set the trend for the market. Because of the huge volumes they trade (one single bank can trade even billions of dollars in one day) in their own name or in the name of their customers, the spreads are very tight.
The trade is based on credit relationships the banks have established one with the other – a bank will be able to access another bank’s offered rate only if the two have a specific credit relationship.
These banks use the Electronic Brokering Services (EBS) or the Reuters Dealing for trading, two platforms that compete for this market. The main difference between the two is that some pairs are more liquid on one platform than on the other.
2. A very important player in the Forex Market is represented by the Central Banks and the Governments.
They are some of the most influential participants and are regularly involved in the market for their international trade payments or to adjust their reserve volumes. Central Banks intervine in the market indirectly, by affecting money supply (decreasing the amount of money will increase the Currency’s value and Vice Versa), or directly, by buying or selling operations that alter Exchange Rates.
The Middle layer – second most important players in the market (their transactions are made via Commercial Banks, which increases rates and makes the Foreign Exchange more expensive than on the Interbank Market)
3. Commercial Companies, Investment Management Firms and Hedgers
Large Companies that make aquisitions from abroad need money in order to buy those products. They place such orders through Banks and, although these trades don’t affect directly and immediately the Forex Market, during time their impact is seen. Also, International mergers and aquisitions require also Currency Exchange, which affects the Market.
Another important segment of the Foreign Exchange market is represented by the investment management firms that manage the accounts of pension funds or insurance companies, for example, and use the Forex market to buy currencies needed in foreign securities transactions or in a pure speculative operation.
Hedging refers to covering the risk of currency devaluation. For example, let’s imagine the US company X that makes computers and orders Japanese technology that has to be paid for one year from now. But in one year, it might become much more expensive to buy Japanese yen with US dollars than it is right now, so the company X wants to cover its risk by buying the Currency at this moment. As it doesn’t have or doesn’t want to spend the respective amount of money at this moment, the company X enters a hedging contract that allows it to lock the Exhange rate.
4. Retail Forex Brokers
These type of entities are the ones through which retail Foreign Exchange actually takes place. Retail Forex brokers form the bridge between the small speculators, the retail traders, and the Interbank Market. Before they appeared, mainly thanks to the technological development and the internet, the Interbank Market was accessible only to Big speculators and investment funds. Retail Forex Brokers are of two types, which will be discussed in a further lesson in detail: Electronic Communication Networks (ECN’s) and Market Makers. The main difference between the two of them is the way the prices they offer are formed.
The Lower layer – these are the small speculators that access the market through retail Forex brokers
5. Retail Traders
The Last layer of the Foreign Exchange market is represented by the retail traders. This is you, interested in making a small profit out of trading currencies through brokers. It might seem a small and insignificant group, but these small trades put all together make about 10% of spot Forex turnover, respectively 150 billion dollar every day, according to the latest figures.
In the end let’s have a look at a figure with All the Market’s participants and how they interact :
http://blog.fxstat.com/wp-content/up.../structure.png
QuoteDislikedGeographic and Time Zones
The volume negotiated is particularly focused in London, but also in New York and Tokyo.
These cities are also Major trading and decision Centers for Monetary matters because of their sheer size in turnover, and number market participants also because the happenings in these places tend to influence other dealing centers around the World. Other important locations at this level are Sydney, Switzerland, Frankfurt, Singapore and Hong Kong.
Many of today's MajorCcurrencies fluctuate freely between each others and are negotiable virtually throughout the world. This has resulted in increased speculation by banks, hedge funds, brokers and individuals. Central Banks occasionally intervene with the intention to move the Currency towards desired levels, however, the underlying factor that leads the Forex Market are the forces of supply and demand.
The lack of physical change enables the Exchange Market to operate 24 hours a day, 5 days a week, covering different areas across the most important financial centers. Its tremendous volume of transaction makes it very liquid and therefore highly desirable to trade. Currencies are the most traded assets in the World - any Commercial or Financial flow across borders may involve a Currency Exchange.
http://www.migbank.com/%7E/media/MIG...es/mod1-1.ashx
Map with the different trading sessions times frames (GMT is Greenwich Mean Time, EST is Eastern Standard Time)
At this point it's interesting to note that the trading activity of each financial center will determine the behavior of the market.
Thus when the London markets open and the session starts, it's still overlapped with the last two hours of activity in Tokyo. Position openings done by London traders and the closure of positions in Tokyo coinciding in a interval of two hours may explain the increase in activity and volatility around this time. Later the European and the US session match during 4 hours in a combination of players, significantly increasing liquidity.
Edge Box - Price Actions like breaks of previous high or low levels and Intraday trends are usually more significant at the start of the London session and during the overlapping period of the European and American sessions. At the end of the American session and during the Asian session, be careful since lower volume conditions may result in false breakouts and false technical signals.
Link Box - It's worth mentioning the importance for the Retail Trader to be aware of the most recent leading center's Trading activity. This applies not only to Market activity, such as the announcement of economic data, but also inactivity. So if these centers are together or separately on holiday, do not be surprised when trading tends to go quiet. Hence it's a good idea to check the Economic Calendar for major International holidays when doing your market research and planning particular trades.
INFO & RESOURCES (Added February 17, 2014)
A. Foreign Exchange Resources
1. Foreign Exchange
2. Forex Magnates
3. e-forex
B. FX Broker Directory
1. Forex Church
2. Forex Brokerz
C. Library
1. Currency Codes
All the Best,
Tsar
Always looking the GREAT, never left GOOD Point...