Retail forex

In financial markets, the retail forex (retail off-exchange currency trading or retail FX) market is a subset of the larger foreign exchange market. This "market has long been plagued by swindlers preying on the gullible," according to The New York Times[1]. Whilst there may be a number of fully regulated, reputable international companies that provide a highly transparent and honest service, it's commonly thought that about 90% of all retail FX traders lose money. [2] [3]
It is now possible to trade cash FX, or forex (short for Foreign Exchange (FX)) or currencies around the clock with hundreds of foreign exchange brokers through trading platforms. The reason that the business is so profitable is because in many cases brokers are taking the opposite side of the trade, and therefore turning client capital directly into broker profit as the average account loses money. Some brokers provide a matching service, charging a commission instead of taking the opposite site of the trade and "netting the spread", as it is referred to within the forex "industry."
Recently forex brokers have become increasingly regulated. Minimum capital requirements of US$20m now apply in the US, as well as stringent requirements now in Germany and the United Kingdom. Switzlerand now requires forex brokers to become a bank before conducting fx brokerage business from Switzerland.[citation needed]
Algorythmic or machine based formula trading has become increasingly popular in the FX market,with a number of popular packages allowing the customer to program his own studies.
The most traded of the "major" currencies is the pair known as the EUR/USD, due to its size, median volatility and relatively low "spread", referring to the difference between the bid and the ask price. This is usually measured in "pips", normally 1/100 of a full point.[citation needed]
According to the October 2008 issue of e-Forex Magazine, the retail FX market is seeing continued explosive growth despite, and perhaps because of, losses in other markets like global equities in 2008.
Key Concepts Behind a Retail Forex Trade

[edit]Currency Pairs
Currency prices can only fluctuate relative to another currency, so they are traded in pairs. Two of the most common currency pairs are the EUR/USD (the price of US dollars quoted in euros) and the GBP/USD (the price of US dollars quoted in British pounds).

[edit]High Leverage
The idea of margin (leverage) and floating loss is another important trading concept and is perhaps best understood using an example. Most retail Forex market makers permit 100:1 leverage, but also, crucially, require you to have a certain amount of money in your account to protect against a critical loss point. For example, if a $100,000 position is held in EUR/USD on 100:1 leverage, the trader has to put up $1,000 to control the position. However, in the event of a declining value of your positions, Forex market makers, mindful of the fast nature of forex price swings and the amplifying effect of leverage, typically do not allow their traders to go negative and make up the difference at a later date. In order to make sure the trader does not lose more money than is held in the account, forex market makers typically employ automatic systems to close out positions when clients run out of margin (the amount of money in their account not tied to a position). If the trader has $2,000 in his account, and he is buying a $100,000 lot of EUR/USD, he has $1,000 of his $2,000 tied up in margin, with $1,000 left to allow his position to fluctuate downward without being closed out.
Typically a trader's retail forex platform will show him three important numbers associated with his account: his balance, his equity, and his margin remaining. If trader X has two positions: $100,000 long (buy) in EUR/USD, and $100,000 short (sell) in GBP/USD, and he has $10,000 in his account, his positions would look as follows: Because of the 100:1 leverage, it took him $1,000 to control each position. This means that he has used up $2,000 in his margin, out of a $10,000 account, and thus he has $8,000 of margin still available. With this margin, he can either take more positions or keep the margin relatively high to allow his current positions to be maintained in the event of downturns. If the client chooses to open a new position of $100,000, this will again take another $1,000 of his margin, leaving $7,000. He will have used up $3,000 inmargin among the three positions. The other way margin will decrease is if the positions he currently has open lose money. If one of his 3 positions of $100,000 decrease by $5,000 in value (which is fairly common), he now has, of his original $7,000 in margin, only $2,000 left.[original research?]
If you have a $10,000 account and only open one $100,000 position, this has committed only $1,000 of your money plus you must maintain $1,000 in margin. While this leaves $9,000 free in your account, it is possible to lose almost all of it if the speculation loses money.[original research?]

[edit]Transaction Costs and Market Makers
Market makers are compensated for allowing clients to enter the market. They take part or all of the spread in all currency pairs traded. In a common example, EUR/USD, the spread is typically 3 pips (percentage in point) or 3/100 of a cent in this example. Thus prices are quoted with both bid and offer prices (e.g., Buy EUR/USD 1.4900, Sell EUR/USD 1.4903).[citation needed]
That difference of 3 pips is the spread and can amount to a significant amount of money. Because the typical standard lot is 100,000 units of the base currency, those 3 pips on EUR/USD translate to $30 paid by the client to the market maker. However, a pip is not always $10. A pip is 1/100th of a cent (or whatever), and the currency pairs are always purchased by buying 100,000 of the base currency.
For the pair EUR/USD, the quote currency is USD; thus, 1/100th of a cent on a pair with USD as the quote currency will always have a pip of $10. If, on the other hand, your currency pair has Swiss francs (CHF) as a quote instead of USD, then 1/100th of a cent is now worth around $9, because you are buying 100,000 of whatever in Swiss francs.

[edit]Financial Instruments
There are several types of financial instruments commonly used.
Forwards
One way to deal with the Forex risk is to engage in a forward transaction. In this transaction, money does not actually change hands until some agreed upon future date. A buyer and seller agree on an exchange rate for any date in the future, and the transaction occurs on that date, regardless of what the market rates are then. The duration of the trade can be a few days, months or years.
Futures
Foreign currency futures are forward transactions with standard contract sizes and maturity dates — for example, 500,000 British pounds for next November at an agreed rate. Futures are standardized and are usually traded on an exchange created for this purpose. The average contract length is roughly 3 months. Futures contracts are usually inclusive of any interest amounts.
Swaps
The most common type of forward transaction is the currency swap. In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date. These are not contracts and are not traded through an exchange.
Spot
A spot transaction is a two-day delivery transaction for most currency pairs (but one-day for USD/CAD and some others), as opposed to the futures contracts, which are usually three months. This trade represents a “direct exchange” between two currencies, has the shortest time frame, involves cash rather than a contract; and interest is not included in the agreed-upon transaction. The data for this study come from the Spot ma

Stock Exchanges

A list of Stock Exchanges Worldwide and other foreign currency exchange resources. A stock exchange or share market is a corporation or mutual organization which provides Trading Facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends.
Afghanistan
Kabul International Stock Exchange
Argentina
Buenos Aires Stock Exchange
Australia
Australia Pacific Exchange

Australian Securities Exchange

Bendigo Stock Exchange

National Stock Exchange of Australia

Sydney Futures Exchange
Bahamas
Bahamas Securities Exchange
Bahrain
Bahrain Stock Exchange
Bangladesh
Chittagong Stock Exchange

Dhaka Stock Exchange
Barbados
Barbados Stock Exchange
Bermuda
Bermuda Stock Exchange
Brazil
BM&F Bovespa

Rio de Janeiro Stock Exchange

Maring� Mercantile and Futures Exchange

BOVMESB
Bulgaria
Bulgarian Stock Exchange
Canada
CNQ

Nasdaq Canada

Winnipeg Commodity Exchange

Toronto Stock Exchange

Montreal Exchange
Chile
Santiago Stock Exchange

Santiago Electronic Stock Exchange

Valpara�so Stock Exchange
China
Shanghai Stock Exchange

Shenzhen Stock Exchange
Colombia
Bolsa de Valores de Colombia
Costa Rica
Bolsa Nacional de Valores de Costa Rica
Czech Republic
Prague Stock Exchange
Denmark
Copenhagen Stock Exchange
Dominican Republic
Bolsa de Valores de la Rep�blica Dominicana
Eastern Caribbean States
Eastern Caribbean Securities Exchange
Egypt
Cairo & Alexandria Stock Exchange
Estonia
Tallinn Stock Exchange
Fiji
South Pacific Stock Exchange
French Polynesia
Euronext Paris
Hong Kong
Hong Kong Exchanges and Clearing
Hungary
Budapest Stock Exchange
Iceland
Iceland Stock Exchange
India
Delhi Stock Exchange Association

Gawahati Stock Exchange

Hyderabad Stock Exchange

Inter-connected Stock Exchange of India

Jaipur Stock Exchange

Ludhiana Stock Exchange

Madhya Pradesh Stock Exchange

Madras Stock Exchange

Mangalore Stock Exchange

Ahmedabad Stock Exchange

National Stock Exchange of India

Bangalore Stock Exchange

OTC Exchange of India

Bhubaneswar Stock Exchange

Pune Stock Exchange

Bombay Stock Exchange

Uttar Pradesh Stock Association

Calcutta Stock Exchange

Vadodara Stock Exchange

Cochin Stock Exchange

Meerut Stock Exchange

Coimbatore Stock Exchange

Digambar Finance Jabalpur
Indonesia
Jakarta Stock Exchange

Surabaya Stock Exchange

Jakarta Futures Exchange
Iran
Tehran Stock Exchange
Iraq
Iraq Stock Exchange
Israel
Tel-Aviv Stock Exchange
Jamaica
Jamaica Stock Exchange
Japan
Fukuoka Stock Exchange

JASDAQ

Nagoya Stock Exchange

Osaka Securities Exchange

Sapporo Stock Exchange

Tokyo Stock Exchange
Jordan
Amman Stock Exchange
Kenya
Nairobi Stock Exchange
Kuwait
Kuwait Stock Exchange
Lebanon
Beirut Stock Exchange
Malaysia
Kuala Lumpur Commodity Exchange

Bursa Derivatives

MESDAQ

FTSE Bursa Malaysia Index

Bursa Malaysia
Mauritius
The Stock Exchange of Mauritius
Mexico
Bolsa Mexicana de Valores
Morocco
Casablanca Stock Exchange
New Zealand
New Zealand Exchange Limited
Norway
Oslo Stock Exchange
Oman
Muscat Securities Market
Pakistan
Islamabad Stock Exchange

Karachi Stock Exchange

Lahore Stock Exchange
Philippines
Philippine Stock Exchange

Philippine Dealing Exchange
Poland
Warsaw Stock Exchange

NewConnect
Romania
Bucharest Stock Exchange

SIBEX

RASDAQ
Russian Federation
Moscow Interbank Currency Exchange

Moscow Stock Exchange

RTS Stock Exchange

Saint Petersburg Stock Exchange
Saudi Arabia
Saudi Arabia Electronic Securities Information System

Tadawul
Singapore
Singapore Exchange

Singapore Commodity Exchange
Slovakia
Bratislava Stock Exchange
South Africa
JSE Securities Exchange / Johannesburg Stock Exchange

The South African Futures Exchange

Alternative Exchange

Bond Exchange of South Africa
Sri Lanka
Colombo Stock Exchange
Sudan
Khartoum Stock Exchange
Sweden
Nordic Growth Market

Stockholm Stock Exchange
Switzerland
SWX Swiss Exchange

Bern eXchange
Taiwan
Taiwan Stock Exchange
Thailand
Stock Exchange of Thailand

Agricultural Futures Exchange of Thailand

Thailand Futures Exchange

Market for Alternative Investment
Trinidad & Tobago
Trinidad and Tobago Stock Exchange
Tunisia
Bourse de Tunis
Turkey
Istanbul Stock Exchange
United Arab Emirates
Abu Dhabi Securities Market

Dubai Financial Market

Dubai International Financial Exchange
United Kingdom
London Stock Exchange

Plus Markets

Markit BOAT

Project Turquose
United States of America
American Stock Exchange

Boston Stock Exchange

Boston Equities Exchange

Boston Options Exchange

Chicago Board Options Exchange

Chicago Board of Trade

Chicago Mercantile Exchange

Chicago Stock Exchange

International Securities Exchange

Miami Stock Exchange

NASDAQ Stock Market

National Stock Exchange

New York Stock Exchange

Philadelphia Stock Exchange
Venezuela
Bolsa de Valores de Caracas
Vietnam
Ho Chi Minh Stock Exchange

Hanoi Securities Trading

Iceland Stock Exchange

Iceland Stock Exchange (Icelandic: Kauphöll Íslands) or ICEX was established in 1985 as a joint venture of several banks and brokerage firms on the initiative of the central bank. Trading began in 1986 in Icelandic government bonds, and trading in equities began in 1990. Equities trading increased rapidly thereafter. A wide variety of firms are currently listed on the exchange, including firms in retail, fishing, transportation, banks, insurance and numerous other areas. Because of the small size of the Icelandic economy and the low cost of public listing, many of the companies traded on the ICEX are relatively small and are relatively illiquid.
All domestic trading of Icelandic bonds, equities and mutual funds takes place on the ICEX. Bonds and equities are regularly traded, though the liquidity is small in comparison with other exchanges. No mutual funds are currently listed on the market. Since its founding, the ICEX has used various electronic systems. Since 2000, it has used the SAXESS system of theNOREX alliance, which allows for the cross-listing of stocks on Nordic stock exchanges. No foreign company lists directly on the ICEX, as the small size and illiquidity of the market makes such a move redundant. Conversely, few Icelandic firms have listed abroad, including DeCODE.Faroese bonds were listed on behalf of Virðisbrævamarknaður Føroya in November 2003, and since December 2007 four Faroese equities have been listed on the OMX Nordic Exchange in Iceland.
Since 1 January 1999, the ICEX has operated as a private company, owned by the listed companies (29%), member firms (29%), the Central Bank of Iceland (16%), pension funds (13%) and the Association of Small Investors (13%).
Þórður Friðjónsson is the current president of ICEX (February 2006). ICEX agreed to be taken over by larger rival OMX Nordic Exchange on 19 September 2006. [1]
On 6 October 2008, the Icelandic Financial Supervisory Authority decided to temporarily suspend trading on regulated market financial instruments issued by Glitnir, Kaupthing Bank, Landsbanki, Straumur Investment Bank, Spron and Exista.[2] When the exchange reopened on 14 October, the stock index fell by 76% [3].