Forex Market Making Information
What is a Market Maker?
Just about every stock market and foreign currency exchange has market makers involved. They are what makes the market turn. Forex uses a market maker called Lexical when working with their clients. Basically all a market maker does is use a hedging technique of sorts for it's traders, but it doesn't work as a middle man or trustee. Also, market makers such as Lexical process their hedging through banks and equity capital as necessary.
You can think of the market makers as the big guys with lots of money and the only ones that can really enough money power to move or "make" the market. Easy forex along with other banks are truly the market makers. This is different than a middle man or intermediate that make money off of commissions.
Is Forex Market Making Fair to the Trader and Client?
A market maker is big and has lots of money but they don't counter or try to interfere with a trader's position. They are more like a medium to keep the market stable and prevent manipulation by regular rouge traders or traders who try shorting the market if they have large amounts of money to trade with. Market makers will recognize the whole of client's positions in the forex trading market. Another characteristic of a market making is they will offset positions of a trader and hedge their own exposure in appliance with the law and policy.
Market makers are neutral to the client, they buy and sell the goods but are not intermediates or middle men in Forex. Services such as portfolio managers, brokers and advisors are not market makers. The market maker is the one who sets up the "ASK" and "BID" price in the market. The lowest price in which someone offers to sell shares of a stock is called the asking price while the bidding price is the highest price a buyer is willing to pay for a stock. The goal of the trader is to buy shares at the bid price or lower and sell shares at the ask price or higher. When someone offers a lower ask or a higher bid, the prices will change, this is what the market maker does, moves the prices up and down!
It wouldn't make sense for a market maker themselves to have influence in market rates and the price per share in Forex. Forex is just too huge and there isn't just one market maker. According to economics, Forex is the closest market to being known as a perfect market. At least this is the theory if you know international economics. Forex is trading nearly 3 trillion US dollars per day and no single bank or financial institute or market maker can handle that kind of volume. There are multiple governments and banks involved around the globe.
So how does Easy Forex make their money and exposure?
It costs money to be in market making, so market makers have to make money somehow. Easy Forex, who is a market maker, gets money from something called the spread. A spread is just the difference between the bid and ask prices in the market. This spread could be anywhere from between 1 cent or 1 dollar. Of course Easy Forex doesn't change the direction of the stock itself, it just takes advantage getting sales when people buy and sell.
For example, a market maker could buy shares from one trader for 1.9 cents and the ask is 2 cents. All they do is wait until someone wants to buy at 2 cents and they sell those shares for a tenth of a cent per share profit. It wouldn't make sense to manipulate the market because even they would lose out. Easy forex operates on hedging. They get most of their exposure from bulk. They combine all of the positions and put the risk on their liquidity providers within the law.
Is Easy Forex market making safe?
Easy Forex has great liquidity providers and you never have to worry about Easy Forex losing to risk. Easy Forex uses some of the worlds largest and leading banks such as UBS Switzerland and RBA Royal Bank of Scotland. You can find even more information about the market makers and how Forex works at their website. You can view the free downloadable Forex ebook on the left side of the screen or visit Easy Forex if you would like to read more articles or sign up. Currently, you can sign up for an account and deposit as little as $50 to begin trading with. You may also deposit funds with paypal, credit card and bank wire as well. visit Easy Forex to see more.