Foreign Exchange Market in TOC

9 The Future of Forex Trade……………………………………………………………………………………………………………………. 12 Conclusion……………………………………………………………………………………………………………………………………………. 12 Abstract The foreign exchange market is largely a virtual financial market—mostly online—whereby the market players interact to exchange currencies. Due to its largely virtual nature, many people are not fully aware of the enormous role the forex market plays in global economic activities, let alone the potential gains that might come from an investment in the market. As the world’s largest financial market, the forex market (despite its risky nature) has great return possibilities if an investment is carried out prudently. Additionally, the forex market permits a safe and reliable environment for the conversion of currencies hence enabling global trade and investments (Valdez & Molyneux, 2015). The forex market is the biggest financial market in the globe (Wójcik et al.

, 2017); therefore, it has several distinctive features that characterize it as one of the most lucrative and attractive markets for global investors who want to boost their returns (Valdez & Molyneux, 2015). Some of the exclusive features of the forex market include: a) The forex market is open 24 hours a day throughout the working days: since the forex market is international, as one market closes in one part of the world, another one opens in another part. This is good news for investors because, unlike the stocks, the forex market stays open 24 hours every day for the five working days. Impact of the Foreign Exchange Market on Global Business Global business involves the movement of goods and services across countries around the globe. This kind of business gives rise to the global economy whereby the prices, demand, and supply of both commodities and services are affected and defined by world events.

It will be an underestimation to state that the forex market affects the global economy. The forex market actually drives and makes possible global business (Valdez & Molyneux, 2015). Assuming you needed an American made car and the local currency in your country is different from the local currency in the USA. Cases of firms falsifying forex trading to the detriment of investors have been reported in the past. Moreover, recent reports of currency manipulation and rigging in forex markets around the globe add to the pressure to develop a working framework for controlling the global giant of financial trading (Aitken, 2014). While currency manipulation and rigging may bypass the retail trader in the forex market, outright deceit and other prohibited activities pose the biggest financial peril of non-regulation to retail traders.

The risk is backed by statistics that reveal that in only six years (from 2001 to 2007), 26,000 traders in the forex market lost approximately $460 million in scams linked to currency trade (Aitken, 2014). In the light of such massive losses and the growing potential of the forex market to command the fortunes of large nations, it is becoming increasingly important for both retail and wholesale forex trade to be brought under a regulatory body. The concern in the forex market is considerably lowered by the fact that the forex market is among the markets with the lowest transaction costs. The costs are characteristically built into the price of currencies and are referred to as the spread. To calculate the spread, a trader finds the difference between the purchasing and vending price.

d) Increased returns from trading on leverage: the capacity to trade more money on the forex than your actual account balance, as enabled by leverage, makes the trade highly beneficial. Assuming that a trader has the 100:1 leverage mentioned in the section on unique features of the forex market. When you are on winning streak, then leverage will definitely feel great as the returns will be incredible. However, when your trade is on the losing trajectory then leverage will make your trading experience worse than it would have been had the leverage been absent. Finally, the lack of strict regulations in the forex market exposes the traders to a significant risk of loss through fraud, manipulations, and other illegal acts that might be committed by traders who may want to gain an unfair competitive advantage.

Enhancing the Forex Trade Experience With the volumes of trading in the forex market progressively being motivated by transactions that are entirely speculative and aimed at profiting from the moves of currency (approximately 87% of all transactions in 2010), anxieties about the impact of such trade, especially on the retail traders, have been on the rise. The use of systems and other transaction techniques that are rule-based by high trading rate firms is likely to be contributing to the sharp volatility and amplified risk of colossal losses for small-scale traders. The traders opted for riskier investments in global equities and bonds hence the upsurge in the turnover of the forex market. The increased turnover in the forex market can also be credited to the sustained rise in the participation of financial institutions that are non-dealers in the market.

Conventionally, activities in the market have been dominated by transactions among the dealers only. The BIS approximates that the no-dealer transactions in the forex market went up by 48% in 2013: roughly $2. 8 trillion daily from $1. Some of the companies in the market have been able to adjust and meet the requirements of the MiFID II directive whereas others have been forced to seek less regulated markets where they can continue to serve their customers at the usual terms of operation. Closely related to the regulatory attempts is the rising call for social trading services in the forex market (Cofnas, 2018). The services demanded in social trading include providing investors with trading signals, charts and graphs, and results to aid them in making informed trading decisions.

Finally, the boom of the cryptocurrency trade is the last notable trend in the forex. The cryptocurrency trade—a trade in the forex which involves the use of digital currency—has gradually gained a foot in the forex market as more and more investors continue to develop an interest for the trade. As the small companies and brokers will be seeking more favorable conditions of trade elsewhere, the large companies are expected to appeal to investors who are not willing to sacrifice dependability and transparency for the few benefits of unregulated trade (Empire, 2017). Therefore, the trends point strongly to a strong, well-regulated forex market with consistent requirements and assurances. Conclusion The forex market is a market whose perils are as high as its returns.

Indeed, there is no guarantee of revenues from an investment in the market; however, the possibility and potential of making a fortune out of the world’s largest financial market are worth the risk. With the push for proper and functional legislation picking up momentum in the recent past, the market has never been safer. Rise of the machines: Algorithmic trading in the foreign exchange market.  The Journal of Finance, 69(5), 2045-2084. Cofnas, A. The Future of Forex Trading: Algorithms, Artificial Intelligence, and Social Forex Trading. In Planet Forex (pp. Retrieved from https://www. fxempire. com/education/article/the-forex-industry-in-2018-regulation-market-size-and-the-future-447777 Finance briefing: Foreign exchange market and why it matters. (2014, April 6). Retrieved from https://www. (2013, December 8). Retrieved from https://www. bis. org/publ/rpfx13.