how the markets works forex

How the Markets Work

When it comes to trading in the financial markets, getting the basics right is essential for beginners.

In a market there are buyers and sellers who negotiate and agree on the price for the commodity being exchanged. The foreign exchange market is no different. However, here the commodity being traded is foreign exchange and the price is the foreign exchange rate. Specifically, a foreign currency is being traded at a particular rate of exchange. The foreign exchange market is fully liberalised with exchange rates being determined by the forces of supply and demand. The market is quite extensive and is highly accessible to individuals and companies. There are numerous financial institutions within this market, through which foreign exchange transactions are effected.

Choose the Right Broker

There are many Forex and CFDs providers, be sure to do intensive research before you decide to commit to a specific company. When it comes to your money, be certain that your Broker meets your expectations. Feel free to ask all the tough questions you need to feel comfortable about your venture and if you don’t get the answers your want, you should consider finding another Broker.

Since the Forex market is an over-the-counter market with no centralized exchange, not everyone receives access to the same prices or quality of execution. Institutions with the largest trade volume and the most solid financials have access to better prices and execution. The bigger the broker, the better they are able to pass on the benefits of size, better prices, and better execution to you.

How Brokers Execute Your Orders

Some brokers use a Dealing Desk, which creates the pricing and executes your orders. The spread is usually fixed, which means that traditionally, the spreads are higher than average variable spreads. Check for restrictions on placing orders during news or economic events; for many traders, this is a key time to trade.

No Dealing Desk usually means that multiple banks stream competing prices through your Forex Broker, so your orders are executed by the banks themselves. This means that there are usually no restrictions on trading news or economic events, but you should check with your broker.


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