The Nature of FOREX Market
The best classification for the Foreign Exchange Market is that it is an over-the-counter market. Having no central exchange and clearing venue makes the forex market more accessible and available to traders from all around the globe.
Learning how the Foreign Exchange market operates involves the following important aspects: type of market maker/s, market time, pricing and trading volume.
Market Makers of FOREX market There are different market makers that can be accessed when trading at the FOREX market. The first one is called an Inter-bank Market. It is comprised of large profit-making banks that trade with one another via electronic brokerage system or EBS. The quotes they make are only available exclusively to the market and banks that they are trading with. Small-time retail traders cannot access this market.
The other type is the Online Market Maker. This is the type of market that is available and accessible even to small-time retail traders. Trading is usually done outside the United Kingdom and United States, and traders normally have connection with some banks on EBS. Note that a huge trading volume pertains to more banking connection.
Market Time A prospecting trader should remember that the Foreign Exchange market operates around the clock. It is a 24/7 working market since banks on every part of the world operates and trades on the FOREX market. The timing starts on Monday morning, Tokyo time, until Friday afternoon, New York time. If one is going to base it on GMT, trading week takes effect from Sunday night until Friday night; or around five days, 24 hours a day.
Pricing and Trading Volume The Foreign Exchange market is unique in its own way. This characteristic extends to the way that the market operates. Technically, the FOREX market does not have any report on the volume and trading prices, unlike other markets which generate and hold reports. Trading occurs simultaneously between diverse parties at different prices, throughout the market. The pricing among market makers are comparatively within close proximities. FOREX trading doesn't have data on the traded volume at any given price or time. The FOREX market offers open interest and leveled volume on currency forecasts which can be utilized as substitute to the record-keeping aspect that other markets have. Take note that these are moving or non-constant values and they are not perfect in nature.
The FOREX market is somewhat floating in nature due to the availability and ever changing trading volume and prices. There is no fixed value on these aspects which makes the market liquid and unique in its own way.