Forex is all about trading in currencies in an international market that works 24 hours a day and 5 days a week. But have you ever wondered how it is always possible to find a trader willing to trade in your currency pairs? And how is every trade made in forex completed in seconds? The answer to both questions lies in the workings of the Forex Market Makers.
Such market makers create a virtual trading floor for traders to trade on. They stand ready with their own bid and offer price for every currency pair. Every transaction of the trader is carried out by the market makers indirectly, without any fear of profit or loss. In forex, the list of market makers comprises investment banks, central banks, commercial banks and big brokerage firms. Forex market makers provide their services in both rising and falling market conditions.
How Do Market Makers Generate Profits?
Every service provider in the world has a means of generating profits. The same is true for forex market makers. They make money by:
- Buying currencies at a price lower than the selling price.
- Selling currencies at a higher price than the buying price.
Money generation here depends on the difference between the bid and offer price. This is commonly referred to as the bid/offer spread. Its value depends upon the liquidity of the market and the transaction cost.
Why are Forex Market Makers Important?
Market makers ensure that the market is always functional. They provide up to date information about every currency pair by refreshing their records every 30 seconds. This solves two purposes. Firstly, it provides an accurate view of the market before the trader trades in it; and secondly, it ensures market liquidity and efficiency of currency pairs. It is this form of marketing solution that has ensured the 24-hour trading system in forex.
Forex market makers have opened the way for several small time players to enter the trade floor. Large multinational companies and registered money brokers have now started providing such services. Some of the most famous Forex Market Makers are CMS Forex, Forex Capital Markets and Gain Capital. These are all regulated and managed by the Commodity Futures Trading Commission of USA.
For more in depth analysis of Forex Market Makers and for user reviews, visit Forex-RateIt. Here you will find a glossary of terms, the latest news and trends, amongst many other things associated with forex.
About the Author
The author Kitz is a digital marketing professional and is associated with Veda Informatics. The Author recommends Foerx Rate It!, which helps traders with the forex broker lists, forex broker reviews, forex education, news & articles.
