› The Foreign Exchange Market

The Foreign Exchange Market

4.07.2018, 15:34

The contrary of the market as a bazaar is the circumstance in which the foreign exchange market is seen as a machine; it is characterized as a platform regulated by established terms and rigid mechanism. These movements can be reckoned regarding probability. Hence, this is a mere mathematical process, explained by the trader.

What is the Foreign Exchange Market?


This metaphor of the currency market stresses the market mechanism, which constantly works perfectly and authentically: I do not believe that there is any irrationality in the currency market. According to this metaphor, the foreign exchange market, like any other machine, demands certain expenses, delivers a certain output and is integrated into a certain built-in procedure that shifts costs into products. This direction of the foreign exchange market "expenses-production" was manifested by a comparison of financial news by a financial journalist with fuel for the market engine. Even though the internal mechanism of the machine is usually concealed, the machine operator can attain knowledge and expertise in relation to the machine, (for instances, using observations and experience. if you drive a car for 20 years, and the machine makes a sound, you can then clarify where this sound stems from," one currency market trader comments.

As the machine does not have emotions, dealing with a car usually excludes feelings: Any trading approach is entirely free of emotions," as cited by one trader. For market participants, the comprehension of the foreign exchange market as a machine indicates a coherent, analytical and unprejudiced rationality of decision-making. You have to make up your mind on certain probabilities based on your experience, but not on the ground of your personal emotions - another trader explains. Hence, in the “machine” metaphor, the currency market is illustrated as a mathematical, prestigious, perfect, logical unit in which emotion and departure from terms, norms, and proven accuracy do not exist.

For instance, many people who try Forex trading end up losing money. The reason is that most people enter the markets with impractical expectations, such as they are going to make $100,000 from just $1,000 in few months. When a trader gets to trading with this “need” or pressure, then he/she trades emotionally, which is the quickest way to lose money.

$100,000
Source: Kiplinger


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