Foreign Exchange as a Financial Market

Currency exchange is very attractive for both the corporate and individual traders who make money on the Forex -
a special financial market assigned for the foreign exchange. The following features make this market different in compare to all other sectors of the world financial system:
• heightened sensibility to a large and continuously changing number of factors;
• accessibility to all traders in the major currencies;
• guaranteed quantity and liquidity of the major currencies;
• increased consideration for several currencies,
round-the clock
business hours which enable traders to deal after normal hours or during national holidays in their country finding markets abroad open and
• extremely high efficiency relative to other financial markets.
This goal of this manual is to introduce beginning traders to all the essential aspects of foreign exchange in a practical manner and to be a source of best answers on the typical questions as why are currencies being traded, who are the traders,
what currencies do they trade, what makes rates move,
what instruments are used for the trade,
how a currency behavior can be forecasted and
where the pertinent information may be obtained from. Mastering the content of an appropriate section the user will be able to make his/her own decisions, test them,
and ultimately use recommended tools and approaches for his/her own benefit.

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Matching Systems

Unlike dealing systems, on which trading is not anonymous and is
conducted on a one-on-one basis, matching systems are anonymous and
individual traders deal against the rest of the market,
similar to dealing in the brokers' market.
However, unlike the brokers' market, there are no individuals
to bring the prices to the market, and liquidity may be limited at times.
Matching systems are well-suited for trading smaller amounts as well.

The dealing systems characteristics of speed, reliability, and safety are
replicated in the matching systems.
In addition, credit lines are automatically managed by the systems.
Traders input the total credit line for each counter party.
When the credit line has been reached, the system automatically disallows
dealing with the particular party by displaying credit restrictions,
or shows the trader only the price made by banks that have open lines of credit.
As soon as the credit line is restored, the system allows the bank to deal again.
In the interbank market, traders deal directly with dealing systems, matching systems, and brokers in a complementary fashion.

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