The Global Purpose of FOREX?

Hi all,

I am new to FOREX, having spent the previous couple of months studying about spread betting. FOREX is something I am taking a fascination with now, and I have enjoyed reading your forum, so thanks.

One question however, like the question I had when I first started spread betting, that was, what's the point of the stock market, why do we want it?

So, why do we have FOREX? I understand how traders may profit from it, similar to the way traders may profit from stocks. But was FOREX actually born? Is it merely a game or does it serve some function regarding a nations economy, or even a banks equilibrium etc?

Perhaps a better question would be, what would happen if we didn't have FOREX?

Please excuse me if I have missed the answer to this at the tacky.

Thanks.

,

Knowing this, why would not everyone finally head to Globex rather than Forex? Don't know if I'm getting paranoid, but sure seems like it's difficult to get even odds in Forex.

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Originally Posted by ;

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Knowing this, why wouldn't everyone finally head to Globex instead of Forex? Do not know whether I'm getting paranoid, but sure seems like it is difficult to get even odds in Forex.

Squid

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You mean, if something goes wrong, you'd actually like to maintain the 1,000 tonnes of US steel?

Dane

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Originally Posted by ;

You mean, if something goes wrong, you'd really like to maintain the 1,000 tonnes of US steel?

Dane

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LOL: Gone are the days of truckloads of Frozen Pork Bellies being dumped on your front yard since you forgot to shut your Long Position.
It's from the agreement you sign with your Brkr and he'll shut the Position on or before Last Notice Day even if you are somewhere in the Bahamas and the only thing frozen you are thinknig about is the Marguarita.

However, that service is represented from the Commission they charge. There is also the simple fact that Margins can and do change without notice. Although the currencies are certainly levereged the most.

Charting a Currency Future is marginally different too.
A Future contract has a definative Lifespan. When the September Contract expires and you move onto the Dec contract there might be a 30 pip gap between the two of them so how can you get a Continuous History Chart from that without all of the openings? Well it is called Back Adjusted and it is not ideal but that's exactly what you get. You are also swimming in a much bigger pond having much much bigger sharks around.

The market closes every day and you expect nobody baums anybody overnight cause if they do your only exit is by telephone to the Night Desk which is generally some stranger who really doesn't give a chit.

Really I had been on the phone to a guy beside the cocoa pit in WTC when he stated I gotta move... Sure put a different slant on the live TV I watched over the following hours.

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Originally Posted by ;

Perhaps a better question is, what would happen if we didn't have FOREX?

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If we don't have forex, every company in this world would be exposed to currency fluctuations risk which would hazard their margins may even them to losses. . .Hedgers are those who secure themselves from currency fluctuations. . .If You're a Japanese maker selling your products in America in US dollars, you may notice your margins evaporate if the USD goes against the Yen, so finally you need to brief the USD in advance so that if this scenario occurs, You're locking on your profits by selling your merchandise...


Thanks,

Nader

This is a superb quesiton and some great replies are given today.

A connected query. . .what support is a commodity trader providing? Some traders are paid countless billions, what purpose did they serve to get paid for a handsome sum?

The response is that he supplied liquidity. Without bandwidth (ie somebody is there willing to take the other side of your trade) that the hedgers will be screwed. When oil goes to $100 and all the corporations run to hedge, there'll be no sellers and the price would go through the roof. So this liquidity providing is big business, and thats exactly what we do because currency traders.

Another point. . .it may look that this market is so complex that its a miracle the thing even works. You need to remember there is history here, the markets didn't appear over night. They're an evolution that's been in the making, right along side the concept of money. This is why we have as much faith in the system.

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Originally Posted by ;

Hi ,

I'm new to FOREX, having spent the previous couple of months studying about spread betting. FOREX is something I'm taking a fascination with now, and I have appreciated reading your forum, so thanks.

One question though, like the question I had when I started spread betting, which was, what's the purpose of the stock market, why do we want it?

So, why do we have FOREX? I understand how traders can profit from it, similar to how traders can profit from stocks. But was FOREX even born? Is it just a sport or does it serve some function regarding a nations economy, or even a banks equilibrium etc?

Maybe a better question is, what could happen if we did not have FOREX?

Please excuse me if I have missed the answer to this in the tacky.

Thanks.

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Hi Sanook,

Forex is a derivative of Globex designed by the insatiable thirst to Generate money from the woes of others.

First, Globex.

Globex is a Currency Futures Exchange traded on the Chicago Mercantile Exchange.
Is it neccessary? You bet. For anything in my rate of trade Spot Forex would most likely be used for this when I take a holiday in a foriegn land to a large European Car manufacturer buying US Steel for shipping in December or March of next year.
I truly don't know which manufacturer buys from which provider but I think you'll find the picture

Let us say BMW in Europe needs 1,000 tonnes of US Steel every 3 months to maintain production and the CFO asks you what are the projections are for Steel Costs This Year. Can you state
HTF do I know? Depends what the US$ does I guess.
Or would you say
We have locked in a maximum cost at'x'$ by means of buying the Steel Futures at'y'$ and, buying US$ Futures Contracts and offset our risk by supplementing that startegy with a few US$ Options also.
Note* this probably isn't the specific scenario they'd use but you get my drift. I'm not in that form of business.

So you find a Currency Market is required by major Industrials to project costs and budget accordingly. Approx 5 percent of trades on CME are Corporate together with the intent of accepting delivery. 95 percent Speculation.
But that is Globex.

Forex is the Casino constructed around that arrangement. No Futures Contracts. Place Only. Small Anti required to let New Inexperienced Players in. Trade execution solely in the hands of this MM. Don't ask permission, just do it [ if they have captured ] ask forgiveness}
that I know it sounds unpleasant more than I intended but I think it. Additionally, I Trade it. But I am conscious of the pitfalls and prevent them if/when I can.


Just my HO.
I'm sure others will present their view.