Platforms and Structures
The foreign exchange market, also referred to as the ‘forex’ or ‘FX’ market is the largest financial market in the world, with a daily average turnover of $5 trillion which is more than 10 times the turnover of ALL global equity markets combined.
The FX market is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example GBP/USD or EUR/USD. About 5% of daily turnover is from companies and governments that buy or sell products and services in foreign countries or must convert profits made in foreign currencies into their domestic currencies. The other 95% is trading for profit or speculation.
Unlike the stock market, the forex market has no central exchange and operates through an electronic network of banks, corporations and individuals trading one currency for another. This enables the forex market to operate on a 24-hour/5 days a week basis, spanning from one zone to another across the major financial centre’s.
Typical traders include large banks, central banks, currency speculators, corporations, governments, and other financial institutions.
The FX market is the most heavily traded market in the world, with currency being the single most liquid asset class. Trading in Foreign Exchange is one of the purest ways to play macro-economic themes, as currencies tend to move together with changes in their countries underlying economic condition.
Regardless of the economic condition, there are always opportunities to realise a profit in these markets so it is no wonder investors are shifting larger sections of their portfolio into the FX market.
Financial markets are bracing for an increase in volatility as the global economy slows (led by the recent slowdown in China) and central banks dabble in the dangerous world of low interest rates. Turbulence in the markets is likely to persist as interest rates remain low, world growth stutters and Brexit uncertainly lingers on in some of the major economies in the world.
We are of the belief that in a market climate like this- there is no one-size-fits-all model for FX and therefore our goal at MSI is to position our clients portfolio in line with what we believe to be the market climate from a technical perspective, and to design strategies that trade with or against these positions on a daily basis with the aim to either yield profits, or hedge the portfolio risk.