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Retail Foreign Exchange Traders

Retail foreign exchange traders gain a growing segment in the market. The retail forex market has a special feature of over-the-counter decentralization. It provides a platform for traders to carry out transactions 24 hours a day. The retail forex market can be defined as the most liquid money market in the world.

Among the traders there can be individuals as well as central banks, different financial institutions and even governments. There are two separate trading desks in the retail forex market. The first one (the dealing desk) trades foreign exchange and the other (the trading desk) is used for off-exchange trading with retail customers. Some retail forex market makers offset clients’ trades on the interbank market. It means that after buying from a client the retail traders sell the profit to a bank. In fact the majority of retail traders are beginners who lack experience in forex trading. That is the main reason why they give up large profits by offsetting.

How does the dealing desk function? Interbank exchange rates are displayed at the dealing desk. They are adjusted to incorporate spreads for the retail market makers to make a profit before they are shown to retail customers.

As it has already been mentioned the majority of retail traders are not professional speculators and suffer sufficient losses. That frequently happens because they always try to pick market tops and bottoms with 10-30 pips. They typically trade short term on 5, 10 r 30 minutes charts in comparison with professional traders who focus on getting into trends and holding them. Retail traders believe that if a price has risen it must quickly come back down and gamble on that. It seems to be unwise because trends actually persist and last longer than many people think.

To avoid huge losses retail traders should employ a technical analysis. Without the technical analysis the trading to a great extent is actualized blindly as retail traders have no access to the flow of orders and their amount from customers and sellers. For example, when you display your order on the forex market your broker either transmits the transaction to the outer market or practically acts as the other side of the transaction, thus, you are trading at random and don’t see anything except the latest displayed price chart.

Non- Bank Foreign Exchange Companies

Non-bank foreign exchange companies differ greatly from ordinary commercial banks in the variety of services that they provide individuals or companies with.

Non-bank foreign exchange companies do not offer speculative trading but deal with currency exchange and international payments to private individuals and companies. While many banks are quite choosy who they would forward contracts and options with, non-bank sector introduces much greater breadth of product to smaller companies. They handle both spot deals and forward contracts. They incorporate a company’s individual checks, provide a comprehensive data and information on foreign exchange rates.

In fact, trading foreign exchange with large banks requires loading of the appropriate software. As for non-bank organizations they execute smaller deals on the web and via the phone. When it concerns smaller businesses non-banks ensure 24 hour access to foreign exchange markets. Banks would present such a luxury to their biggest customers.

Besides, while banks are frequently busy bundling their products, non-banks work on bringing together their foreign exchange, capital markets and trade services into one product.

One more advantage of non-banks is that they give expert advice over hedging and managing risks. The companies analyze cash flows, trade flows and currency risks to help provide hedging for various interest rates.

It is no secret that banks generate revenue by building in a significant profit margin or a spread and by selling currencies at higher rates. They charge transfer fees. In comparison with the banks, non-banks offer better foreign exchange pricing the way of reduced spread, i.e. between one and two percent of the total transaction amount.

Before applying to a non-bank foreign exchange company one should be sure of its authority. It is of a great importance to find experienced and locally based operators in the same time zone. Future clients should have a clear cut idea of the options and the opportunities guaranteed by the non-bank which in its turn should make the transactions simple, stress free and cost effective.