Forex Dealing Basics
Due to the increasing recognition that the foreign exchange market is one of the most lucrative financial markets in the world, more and more people have become motivated to participate in it. Forex traders are no longer limited to central banks, commercial banks, multinational companies, hedge funds and other financial institutions. At present, with the advent of modern communication technology and Internet, more and more private investors have come to avail forex dealing services offered by several online companies. Online forex dealing systems make it more convenient and affordable for private investors to initiate transactions.
Prior to participating in the forex market, it is very beneficial for a person to know basic facts about forex dealing. Some of the important details included in all forex dealing handbooks are the trading hours, currency pairs, fees, and procedures in trading. The forex market is open twenty fours daily on five business days. The forex market is considered an over-the-counter (OTC) or interbank market because it has no physical location or central exchange. Rather, transactions are made over the telephone or through an electronic network. It is open twenty four hours daily because when one forex trading center closes, another forex market in another part of the world opens. This allows investors and traders to buy and sell currencies whenever they feel the need to make transactions. The floating exchange system is followed by all currencies in the world and they are always traded in pairs. Forex dealing transactions are currently available in 14 pairs namely: EUR/AUD, EUR/CHF, AUD/JPY, USD/CAD, USD/JPY, EUR/USD, GBP/USD, USD/CHF, AUD/USD, EUR/JPY, EUR/GBP, GBP/JPY, CHF/JPY, GBP/CHF. The Commodity Futures Trading Commission (CFTC) is the regulatory agency for all foreign exchange market transactions. The Commodity Futures Modernization Act of 2000 (CFMA) mandates all policies in managing and regulating the operations of the foreign exchange market. All brokerage companies that allow private investors to participate in forex transactions should be registered as a Futures Commission Merchant (FCM). Moreover, no fees or commissions are to be charged to customers regardless of account balances or trading activities as indicated in the forex dealing handbook.
Bid and ask quotes, as well as live prices are published to private investors through a currency trading dealing software. Traders can just easily click on offers through this software and then a trading transaction can immediately be executed. Price updates are dependent on market conditions. Any forex trader can deal using the available price. Forex dealing transactions can be executed through the Internet. The process is very simple as the number of lots will only be entered and bid or offer options will only be clicked using the software. Online confirmation of deals will be sent to the trader within seconds of the transaction. Traders may also deal over the telephone as the forex trading desk is open all day during business days. Dealers will quote spreads and bid/ask prices to traders. All forex transactions via the phone would have to be subjected to pre-deal margin availability check and all phone conversations will be recorded for the mutual protection of dealers and traders.
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