The number one issue traders face right now is misinformation. Those running the retail forex industry know that traders are unaware that the whole trade environment switched from real to 100% simulated in the US and parts of the UK. Any trader who searches for information on Google or Bing will come up with the answers I posted below. They explain forex the way we think it is now. But its actually only the way things used to be. This old information is keeping thousands of traders from seeing the truth.
The truth is only found on the NFA website and only if you dig deep. Here is the link to read it in detail for yourself-http://www.nfa.futures.org/nfamanual/NFAManual.aspx
It clearly states that
- All traders and businesses with less than 10,000 million in assets is labeled a “Customer.”
- “Customers” trade the “Retail Market” “OTC”
- The “Retail Market” is only traded Off-Exchange
- On all Off-Exchange transactions, the broker acts as the only counter party.
- That they can only claim “no slippage” if they dont have access rights to adjust the price orders were closed at- after the ordered was executed.
The blue italicized writing is comments by me. Red is critical info. as is bold Lettering.
Tell every trader the truth. Demand simulated trading be recategorized as online gambling, The difference between the old platforms and the current ones is what the program is being used for. The real platforms are nothing but data pushers. A way to pass numbers back and forth with accuracy- and with a record of the transaction. Like paying for something with your pay pal account. It processes the numbers and transfers the money for you.
The new platforms are no longer a tool that a broker uses to transfer orders back and forth between people. The new platforms are running self contained simulated trading games that trade against you right there on the platform. Your orders are not sent to any bank or other traders. It’s just like playing on line slots. You put real money in an account and virtually pull the lever and see if you win. You know its rigged to make you loose. So are the trading platforms. (You didn’t loose your touch in the last 5 years- they just started cheating).
The following definitions came from wipikidia and Investopedia. The 3rd definition is thru the UK. You can tell they basically copied what the the other page said.
What they describe is what most traders think they are doing- You think your using a trading platform to trade on the Interbank trade network. Your trading all by your self against a computer game programmed to make you loose.
Definition of ‘Interbank Market’
The financial system and trading of currencies among banks and financial institutions, excluding retail investors and smaller trading parties. While some interbank trading is performed by banks on behalf of large customers**(accounts over 10 million only), most interbank trading takes place from the banks’ own accounts.
Investopedia explains ‘Interbank Market’
The interbank market for forex serves commercial turnover of currency investments as well as a large amount of speculative, short-term currency trading. According to data compiled in 2004 by the Bank for International Settlements, approximately 50% of all forex transactions are strictly interbank trades. (not any more)
Interbank foreign exchange marketFrom Wikipedia, the free encyclopedia
The interbank market is the top-level foreign exchange market where banks exchange different currencies. The banks can either deal with one another directly, or through electronic brokering platforms. The Electronic Broking Services (EBS) and Thomson Reuters Dealing 3000 Xtra are the two competitors in the electronic brokering platform business** and together connect over 1000 banks. The currencies of most developed countries have floating exchange rates. These currencies do not have fixed values but, rather, values that fluctuate relative to other currencies.
** The only real platforms
The interbank market is an important segment of the foreign exchange market. It is a wholesale market through which most currency transactions are channeled. It is mainly used for trading among bankers. The three main constituents of the interbank market are
the spot market
the forward market
SWIFT (Society for World-Wide Interbank Financial Telecommunications)
The interbank market is unregulated and decentralized. There is no specific location or exchange where these currency transactions take place. However, foreign currency options are regulated in the United States and trade on the Philadelphia Stock Exchange. Further, in the U.S., the Federal Reserve Bank publishes closing spot prices on a daily basis.
Unlike the Stock Market, the Foreign Currency Exchange Market (Forex) does not have a physical central exchange like the NYSE does at 11 Wall Street. Without a central exchange, currency exchange rates are made, or set, by market makers. Banks constantly quote a bid and ask price based on anticipated currency movements taking place and thereby make the market. Major Banks like UBS, Barclays Capital, Deutsche Bank and Citigroup handle very large currency trading (forex) transactions often in billions of dollars. These transactions cause the primary movement of currency prices in the short term.
Other factors contribute to currency exchange rates and these include forex transactions made by smaller banks, hedge funds, companies, forex brokers and traders. Companies are involved in forex transaction due to their need to pay for products and services supplied from other countries which use a different currency. Forex traders on the other hand use forex transaction, of a much smaller volume with comparison to banks, to benefit from anticipated currency movements by buying cheap and selling at a higher price or vice versa. This is done through forex brokers who act as a mediator between a pool of traders and also between themselves and banks.
Central banks also play a role in setting currency exchange rates by altering interest rates. By increasing interest rates they stimulate traders to buy their currency as it provides a high return on investment and this drives the value of the corresponding central bank’s currency higher with comparison to other currencies.
Interbank Forex Markets Explained
The Interbank forex markets, as obvious from the term, is the highest level in the foreign exchange markets where banks exchange currencies directly with one another. The Interbank forex markets can also be referred to as the forex wholesale market where most of the currency transactions are performed and is mostly used for trading within the banking community. The interbank forex markets is unregulated and decentralized, thus there is no central location or an exchange where these transactions take place, unlike the stock markets where transactions are carried out at the stock exchange.
What comprises the Interbank Forex Markets
The Interbank makers is made up of three components.
Spot markets: Also known as the organized or OTC (over the counter) market. This is made up of cash market is known as the publish financial markets where financial tradable instruments and/or commodities are traded for immediate delivery. The spot market prices are individually agreed between the parties and therefore the prices are usually not published. The spot markets entails a two day delivery period in order to move cash from one bank to the other. The online forex trading markets is usually comprised of the spot markets as trading is purely speculative driven and transactions are done on the spot.
Forward markets: The forward markets is over the counter financial markets that dealins in the CFD’s or contracts for differences for future delivery. Forward markets are also known as forward contracts and are personalized between the buyer and seller which includes the delivery time and amount which is usually determined at the time of the transaction.
SWIFT: Most of us who have ever made an international bank WIRE would have heard about this or BIC (Bank Identified Codes). SWIFT is an acronymn for Society for Worldwide Interbank FInancial Telecommunications. SWIFT is used to send payment orders that are usually settled via the correspondent accounts which the banks have with each other.
What moves the Interbank Exchange Rates
Due to the fact that the forex market is decentralized, banks set their own bid and ask prices taking into account any anticipated currency fluctuations that might take place. It is safe to say that the forex market is actually made up of market makers due to the fact that banks have their own price quotes. Large scale banks such as UBS, Deutsche Bank, HSBC, Citigroup handle large volumes of currency transactions and it is due to the movement of this volume which is the primary driver of the currency prices, especially in a short term perspective. Of course, there are other factors that influence the Interbank exchange rates such as hedge funds, smaller banks and online forex brokers and traders.
How do forex traders fit into the bigger game
Forex traders make money by purchasing one currency and selling another currency. The difference in the bid and ask price of these currencies is how profits are made. Therefore, forex traders are familiar with the term, buy low sell high. Forex traders make their profits by the fluctuations in the currency prices as cited above. ECN Forex brokers are the kind of brokers that connect forex traders straight to the tier 1 liquidity providers made up of banks and financial institutions. It is because of the interbank forex markets that ECN forex traders get to see pricing where in most cases the spreads are almost zero.
Read more http://www.ecnforex.co.uk/interbank-forex-markets-explained/
NFA supporting their lie:
SOME foreign currency contracts are traded off exchange? they make it sound like it happens occasionally instead of the 100% off exchange trading done for all retail customers. All with less than 10 million.