How much does the bank trade in Forex market and which are implications for an individual investor?
Popular Forex Trading Box
By reading several financial sites, there are high chances that you might obtain a basic idea that it is very simple to earn money in the Forex trading. I am really feeling sorry to say that it is not the real thing. One of the popular reasons for this is you compete against some important players: Central banks and governments. What is the amount that popular banks generally trade in the trading market? Well, regular turnover is recently in an area of about four-dollar trillion each day and the commercial banks are busy making nearly half of it. Shortly, you will find a large amount of money. While it is surely possible for beating the popular banks in Forex trading market, it is not easy.
Below you can see top 10 banks list :
Most of this banks are top and most popular banks.Rating is made by Deposits in billions. For example JP Morgan Chase & Co. has $1,009 billions deposit, Bank of America has $884 billions etc.
Why Top world Banks do Trading?
Central banks generally use Forex trading market in order to control the supply of money, drive the currencies towards the preset rates of target and utilizing their overseas reserves for stabilizing the trading market. For most of the banks, however, most of Forex trading is regarded to be speculative. A popular and big bank might be trading billions of dollars each day, purchasing and selling the similar currencies and earning money off the cost difference, which is known as pip spread. PIP signifies price interests point. It is regarded as a small amount that can be changed by a currency value; it is usually a place of fourth decimal.
Most of the banks set the bid cost and an asking cost. A bank that sells small dealers might have five pips spread between two costs, while the company of credit card might charge hundred pips. Trading between important banks, on the contrary, might have spread of not more than the single pip.
Beating the Big popular Banks and Forex Market
The Forex market is decentralized in a fair manner. Trading takes place all the time and is generally open to everyone. It is not easy to earn money in Forex trading as there are large numbers of players having large numbers of money involved in it and can make deals almost instantly in reply to the changing conditions. In addition, purchasing currencies in volumes needed to obtain best rates need a volume which is importantly out of the reach of an average investor. Always keep in mind the question we had asked above, the amount a bank trades in the market? The amount is generally calculated in trillion dollars each day, where the single banks might be making the deals worth billions dollars. Find is this with whom you want to compete with?
Luckily, there is yet another method by which you can involve yourself in the currency trading. Although the popular banks make a huge amount of money off pip spread, individual depositors can earn a huge amount of cash if they can effectively guess how the currency costs will be changed in the future depending on the political events. Just like beating a stock market, it is quite difficult as it needs finding accurate information that is not taken in account in existing costs. Further contracts permit one to lock the cost for trading which will be executed in few weeks. Months or also few years in the coming days, permitting one to lock in the gain if one can look for a permanent trend that result in a significant manner altering a relative value of the two different currencies.
Trading in forex market can be dangerous because of the utilization of leverage. At the time when the margin account opens with a broker, the agent extends loans to the dealer to utilize in taking certain positions; the loan can be over hundred times the dimension of a deposit. As an effect, a rate of leverage of about 100:1 permits someone to deal nearly $100,000 which is worth the currency by making an investment of nearly $1000. You are merely responsible for the gain or loss on whole invested amount and not the things that you put; if you utilize about $1000 for investing nearly $100,000 and currency rises to nearly five per cent your gain is five grand which is regarded as five times the things that you put. This is regarded to be useful as the cost of the currencies undergoes changes by a few amounts every day; however, it makes things possible to lose more than a specific amount that is deposited, so you should be really careful.
On the end :
All this theories are for the “big dogs”. We, small forex traders, need to learn technical analysis and monitor big important fundamental events (forex calendar). This article is just one of the articles which shows how forex market is big with huge daily volume.