Spread Trading Solutions

The forex (Foreign Exchange) market is unique because of ' volumes, ' the extreme liquidity of the market, ' its geographical dispersion, ' its trading hours: 24 hours per day except on weekends (from 22:00 UTC on  Sunday, until 22:00 UTC on Friday)

' the variety of factors that affect exchange rates.
' low profit margins compared to other markets of fixed income (but profits can be high due to very large volumes)
' the use of financial leverage on transactions

As such, it is sometimes regarded as the market closest to the market ideal, with perfect competition, with the exception of market manipulation by central banks. According to the Bank for International Settlements, average daily volume on the foreign exchange market is estimated at $ 3.98 trillion. On trading activities, the main financial markets accounted for $ 3.21 billion. The 3.21 trillion dollars on the major trading currencies in the market are as follows:

' $ 1'005 billion in spot transactions (immediate delivery)
' $ 362 billion in options (future delivery)
' $ 1'714 of foreign exchange swaps
' $ 129 billion estimated non

Several other developed countries also permit the trading of derivatives on the Forex (such as contracts on currency futures and options on currency futures). Most emerging countries do not treat Forex derivatives because of controls on capital account. However, some emerging countries (eg Korea, South Africa, India ...) have already successfully trade currency futures, despite some controls on capital account.

Foreign exchange transactions increased by 38% between April 2005 and April 2006 and has more than doubled since 2001. This is largely due to the increasing importance of market exchange as an asset class in its own right and to the increase in forex management fund, and especially hedge funds and pension funds.

The wide choice of places of Forex trading have enabled the development of strong retail (individual traders) on the foreign exchange market. In 2006, retail trade accounted for more than 2% of the total foreign exchange market volumes with average daily turnover of more than $ 50-60 billion.

The foreign exchange market is an OTC market (Over The Counter), where brokers / dealers negotiate directly with one another, there is no central market place or (e) exchange. The biggest geographic trading up is the United Kingdom, mainly in London, which increased its share of total turnover of transactions from 31.3% in April 2004 to 34.1% in April 2007. The ten most active up nearly 80% of the volume of transactions, according to the 2008 Euromoney FX poll.

Large international banks continually provide the market both in terms of supply (purchase or bid) and demand (sales or ask). The difference (spread) between bid and ask is the difference between the price for the sale ( "ask") issued by a bank or a market (market maker) and the price at which a market (market maker) will buy (bid). This difference is minimal for actively negotiating pairs of currencies, usually 0-3 pips. For example, the supply / demand (bid / ask) quotation for the pair EUR / USD might be 1.2200/1.2203 at retail. The minimum trading size for most trades is usually 100,000 units of base currency, which is defined as a "bundle."

These differences (spreads) do not apply to customers in their banks: the listing would be to transfer to 1.2100/1.2300, 1.2000/1.2400 and for the exchange of banknotes or traveler's checks. The spreads can vary, but the pair EUR / USD spread is still around 3 pips. Competition can be much more aggressive for larger transactions, with spreads on the key variable pairs, which may then fall below 1 pip.

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About the Author:

I am a Forex Trader.I love currency trading.