FX — The Most Dynamic Market in the World

24-Hour Market:

Spot foreign exchange trading is the perfect market for active event driven traders. Unlike in stock and futures trading, currencies do not get halted, ensuring true 24-hour trading and the ability to trade during virtually any important event. The round-the-clock nature of the foreign exchange market ensures that there will be minimal gaps in the market; in other words, there is no potential for the market to close one day and reopen the next day at a drastically different price. In equities and futures markets, centralized exchanges end operations when the business day concludes. After-hours market liquidity is quite thin, thus making trading unfeasible. More importantly, traders who leave positions open after the market closes expose themselves to greater risk: should news be released after the market closes that affects positions, traders will not have the opportunity to immediately liquidate. As a result, they will be forced to cope with market conditions upon opening the following day, when the market may open at a very different rate than when it closed. The seamless continuity of the foreign exchange market ensures that the market is liquid at all times, thus alleviating traders of potential risks associated with market gaps and illiquidity.

Equity & Futures Markets are Constantly Halted

Market Transparency:

Price transparency is very high in the FX market and the evolution of online foreign exchange trading continues to improve this, to the benefit of traders. One of the biggest advantages of trading foreign exchange online is the ability to trade directly with the market maker. A reputable forex broker will provide traders with streaming, executable prices. It is important to make a distinction between indicative prices and executable prices. Indicative quotes are those that offer an indication of the prices in the market and the rate at which they are changing. Executable prices are actual prices where the market maker is willing to buy/sell. Although online trading has reached equities and futures, prices represent the LAST buy/sell and therefore represent indicative prices rather than executable prices. Furthermore, trading online directly with the market maker means traders receive a fair price on all transactions. When trading equities or futures through a broker, traders must request a price before dealing, allowing the broker to check a trader’s existing position and ‘shade’ the price (in their favor) a few pips depending on the trader’s position. Online trading capabilities in FX also create more efficiency and market transparency by providing real time portfolio and account tracking capabilities. Traders have access to real time profit/loss on open positions and can generate reports on demand, which provide detailed information regarding every open position, open order, margin position and floating profit/loss per trade.