THE GLOBAL CURRENCY MARKET
The Global Currency Market or FOreign EXchange market or Forex or Fx is a huge financial market with daily volumes of more than 4 trillion US Dollars. The Forex market is a pure OTC (over-the-counter) market and that means that there is no centralized service. The participants in the Forex market are linked each other electronically via computers, fax and telephone and all together form an integrated currency exchange.
24/5 OPEN MARKET
Currency trading is conducted via the ECN network (Electronic Communication Network) in many different markets around the world. The Forex market is open 24/5 -from 5 pm EST on Sunday until 4 pm EST on Friday.
There are many different participants in the Foreign Exchange market that include central banks, commercial banks, hedge funds, investment companies, commercial companies, retail investors etc.
The top Forex players are coming from the interbank market, where large banks and hedge funds can exchange currencies one against another. The top Interbank platforms for trading currencies are EBS (ICAP) along with Thomson Reuters.
Table: The Major Players in the Interbank Market
Data: Euromoney, Survey 2015
Since the birth of Online Forex Trading 15 years ago more and more retail traders see the Forex Market as an opportunity for their Financial Freedom. Today there are tens of millions of active Forex traders from all over the world.
The online Forex trading requires the existence of a Forex Trading Platform, an Internet Connection and a Forex Broker.
◙ The Platform MetaTrader-4 is the clear industry standard among Forex Traders but there are many other platforms too such is the cTrader, the NinjaTraders, the TradeStation etc.
◙ The quality of the internet connection is important for Day-Traders, Robotic Traders, and News-Traders
◙ The Online Forex Brokers are categorized by the method they use to execute their client orders. Therefore traders may choose among a Market Maker or an ECN/STP broker. Market makers execute orders via a dealing desk (DD) and actually create a market within a market. From the other hand, ECN/STP brokers are No-Dealing Desk (NDD) brokers and that means that they transfer their client orders directly to their liquidity providers (most commonly large banks).
How to Trade Oil? –Online Oil Trading Guide
Oil is still the world's most important energy asset. Historically speaking, the price of Brent trades in a wide range between 30 USD per barrel and 150 USD per barrel.
Which Financial Instruments can be used for Oil Trading?
Oil Price Fluctuations can be traded mainly via the use of four different financial instruments:
(i) Crude Oil Futures
(ii) Crude Oil Standard Options
(iii) CFD Oil Contracts
(iv) Binary Options Oil Contracts
The price of oil is determined by the market on a 24/5 basis. The easiest way to trade oil is via the use CFDs, but let’s start by presenting some basic information for oil traders.
Who is Trading Oil?
Oil is traded mainly by three parties: oil consumers, oil producers, and speculators. Oil consumers and producers open positions in the futures market in order to manage and to reduce their market risk. Market risk is the risk that derives from the general market price fluctuations. Therefore, trading oil for producers and consumers can serve the role of hedging against excessive market risk.
Speculators Trading Oil Price Fluctuations
Oil is also traded by common speculators who are opening short and long positions in order to profit from forecasted short-term oil price fluctuations.
■ At times when speculators believe that crude oil prices will go up, they buy Crude Oil Futures or CFDs or Options (Going Long)
■ At times when speculators believe that crude oil prices will go down, they sell Crude Oil Futures or CFDs or Options (Going Short)
How the Oil Price is Formed
The price of oil is formed in three ways:
a. The OPEC Basket Price
The OPEC Basket price is a mix of the prices of OPEC oil producers (Saudi Arabia, Venezuela, Mexico, Dubai, Nigeria, and Algeria).
b. NYMEX Futures Price
The NYMEX oil price is the most important method of pricing oil. The price of oil is based on a Futures contract. Actually, a NYMEX oil future represents the current value of a barrel that it shall be produced and purchased in the future.
c. IRAC (Imported Refiner Acquisition Cost)
This is a US oil pricing method. The IRAC price is based upon the total volume of oil imports in the US.
Two Major Oil Types
In total, there are more than 160 types of oil, these are the two main types:
Brent is used for gasoline production and other applications and it is formed by combining 15 different types of oil. Brent oil is priced with the premium of 4-5 USD per barrel compared to the price of OPEC Basket.
(2) WTI (West Texas Intermediate)
West Texas Intermediate is mainly used for producing gasoline and it is priced at a market premium of about 1-2 USD per barrel compared with Brent. That means 5-7 USD price premium compared to the price of OPEC Basket.