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    What is a managed account? Should you use it?

    What is a managed account? Should you use it?

    There are many ways to invest in the financial markets; one is by using a managed account.

    Think of it as a broker giving you financial freedom if you don’t have time or experience in trading.

    Do you know managed accounts started in the 1970s?

    This guide will discuss managed accounts and how you can sign up for a managed account.

    What is a managed account?

    A managed account is a brokerage account in which a group of assets is selected for an individual and a professional asset manager manages them.

    Don’t get me wrong; the individual investor owns the account, but an asset manager manages it.

    With a managed broker account, you agree to let the brokerage firm decide how to invest your money. The asset manager will trade on your behalf to grow your account.

    It means you don’t have to do research and market analysis. The asset manager will do all the work.

    Types of managed accounts

    Now let’s go through the multiple types of managed accounts.

    Individually managed account

    It’s a separate account where your money manager trades on your behalf and follows all of your instructions, as the name suggests.

    The manager’s trading decisions are influenced by your risk tolerance and the strategies you devise for them.

    Most individual-managed accounts come with a minimum deposit of $10,000.

    Pooled managed account

    Pooled-managed accounts work in the same manner as mutual funds. The funds of several individual investors are pooled together into the same managed account.

    Each investor in the pool may have a different portfolio, trading strategy, and comfort level with risk.

    To decide which pool to join, you should look at how different funds have performed over the last several years.

    The minimum deposit for pooled, managed accounts is around $2000. However, it depends on the broker.

    PAMM managed account

    It is a pool account involving money management by percentage allocation.

    Here, the asset manager can look at the trading activities of several investors at the same time. PAMM accounts allocate the manager’s positions and profit/loss across several portfolios they manage.

    It is called the “percent allocation money management module.” The risk is divided across the portfolios of all traders participating in the module.

    LAMM managed account

    LAMM accounts are the predecessors of PAMM accounts. They both work the same way, but there is one big difference: you choose the trade quantity based on the volume.

    For example, if the asset manager buys one standard lot for any forex pair, each investor’s account will fall or rise by one standard lot.

    Another way to look at LAMM is as a copy trading system. The trader who manages the LAMM account charges a fee to the investors.

    The asset manager opens positions in the parent account, which are also in your sub-account.

    MAM managed account

    A MAM account, aka multi-account management, oversees multiple accounts. Here, you can tell the account manager he or she can increase each trade’s risk level and volume.

    MAM accounts have some handy features. Positions are instantly opened on all sub-accounts. Investors can get full information on conducted trades and a comprehensive trade history.

    They may also track commissions and the manager’s performance in real-time.

    What to look for in a managed account?

    Now that you know the different types of managed accounts, let’s move on to what to look for in a managed account.

    There are a few things you need to consider:

    Find a suitable broker

    It is the most important aspect of a managed account. Recently, many shady brokers have popped up offering managed accounts. As a beginner, it’s important to find a reliable, regulated brokerage firm with good investing conditions.

    Look for a good fund manager

    You need to find an asset manager to start using a managed account. Choosing an asset manager should not be taken lightly.

    You need to look at their overall profitability, years of experience, and how they perform trades.

    Costs and fees

    One of the most important things to consider is how much a managed account from a brokerage firm costs.

    Most brokers charge a fee based on the amount of money you have invested. For example, if you have $10,000 invested in a managed account that costs 1% annually, you will pay $120 every year.

    Peace of mind

    Finally, the entire point of paying for account management is to get the peace of mind you need. If your broker is hesitant or the fund manager is not following your financial goals, it’s time to switch to another broker.

    Pros of managed account

    As a beginner, most people say, “Why do I trust my funds to other people?”

    Good question!

    There are a lot of reasons to open a managed account. Here are a few of them.

    Hands off approach

    The way to profit in the markets is to understand technical and economic indicators. It can take several years for a beginner to learn the ropes of these indicators.

    As a result, managed forex accounts are suitable for beginners. Behind the scenes, your asset manager will do technical analysis and enter buy and sell orders as needed.

    Don’t require too much time

    A managed account is your best bet if you do not have enough time to monitor and trade the markets.

    Beginner traders can’t afford to spend enough time keeping up with changes in the market, but success in the markets requires total commitment.

    Managed accounts allow such folks to not dedicate much time and let the manager do all the work.

    Keep emotions in check

    Some traders, especially beginners, can’t keep their emotions in check. Such people are prone to clinging to positions that are clear losers. Others find forex trading fascinating and tend to overtrade, blowing the account super-fast.

    If you have such qualities, you should leave your position in the hands of an account manager.

    Final thoughts

    Investing doesn’t have to be hard, and managed accounts are a great way to make trading less stressful.

    Before choosing the broker and the manager for managed accounts, you should do proper research.

     

     

     

    Understanding Forex Regulation

    Understanding Forex Regulation

    The foreign exchange market, despite being the largest financial market in the world, has no formal exchange or centralized location.

    With the exception of currency futures and options markets, such as the IMM in Chicago, the trading of currencies has usually been conducted on a global telephone network and more recently via Electronic Communication Networks or ECNs.

    Because of the global nature of currency trading, this allows banks and other forex participants to trade currencies 24 hours a day during each day of the business week.

    Relative Lack of Regulation in the Interbank Forex Market

    Perhaps because of its huge size, the Interbank forex market remains one of the last unregulated markets on the planet. This means that no international agency or watchdog organization regulates the ongoing trading activities of the professional Interbank forex market.

    Because of this relative lack of regulation, professional forex traders benefit from being able to use a number of strategies which cannot be implemented in the stock market.

    Various Regulating Organizations Protect Forex Customers

    Irrespective of the lack of a central regulating agency for the Interbank forex market, many countries have agencies which oversee the foreign exchange operations conducted within their respective nations.

    These agencies and their regulations primarily apply to companies doing business for or with customers, such as online retail forex brokers.

    Such regulatory agencies also usually prosecute cases that involve fraud and other violations of the financial services laws in their respective countries. They include the following agencies:

    • S. Regulatory Agencies

    Because currencies are treated as commodities, and the two-day delivery on spot value trades puts them into the futures category, brokers doing business in the forex market in the U.S. must register as Commodity Trading Advisors or Futures Commission Merchants with a regulating agency. Other types of registration include Commodity Pool Operator and Introducing Broker. The relevant U.S. regulatory agencies include:

    • National Futures Association (NFA)

    The NFA consists of a self regulatory organization specifically for the U.S. futures industry. The objective of this agency is to protect investors and maintain the integrity of the futures markets.

    • Commodity Futures Trading Commission (CFTC)

    An independent government agency of the U.S. government, the CFTC oversees all brokerage companies doing business in the forex market that are based in the United States. The agency enforces its regulations and actively prosecutes fraud in the forex and other markets.

    • European Regulatory Agencies

    The European Union makes each of its member countries responsible for the regulation of its financial markets to conform to its Markets in Financial Instruments Directive or MiFID. In addition, the MiFID “passport” allows companies regulated in one E.U. country to be able to offer services to customers in other E.U. countries.

    One especially influential European agency is the U.K. Financial Services Authority or FSA that acts as the United Kingdom’s chief regulator of the financial services industry. The FSA performs a similar role to the U.S. CFTC in Britain.

    • Swiss Regulatory Agencies

    The Swiss Federal Department of Finance is a government agency that regulates and oversees financial institutions in Switzerland. The Swiss PolyReg consists of a self-regulatory organization recognized by the Swiss Federal Money Laundering Control Authority.  The agency regulates all persons and legal entities with a Swiss domicile that act as financial intermediaries.

    • Australian Securities and Investments Commission

    The ASIC regulates all financial markets and services in Australia. The ASIC is the Australian version of the U.S. CFTC and the U.K. NFA combined.

    Weighed down by Student Debt? 7 tips to get out of it, quick!

    People around the world are becoming increasingly dependent on student loans to finance their studies, and so, IMMFX is happy to share these 7 tried-and-tested tips to help anyone fast-track their way out of student debt:

    People with degrees can earn 56% more than high school graduates, which makes the decision between continuing your studies or setting off on your own after high school a no-brainer for many. 

    We get it. As living costs increase and more employers seek degree-holders, we all want to secure the best opportunities to guarantee comfortable and stable futures for ourselves and our loved ones.

    However, the cost of pursuing a degree has also grown drastically over time, with students today paying 213% more than what their parents did back in the 1980s. Resultantly, students have increasingly become dependent on student loans to finance their studies, to the point where there is now around $1.5 trillion of total student debt in the United States.

    Each graduate owes an average of $37,172 of student debt as of 2018, making it much more difficult to become truly financially independent. With the cost of higher studies extending far beyond simple tuition fees to include dormitory and living expenses, textbooks, and specialized materials to consider, it may come as no surprise that around 2 million graduates end up owing more than $100,000.

    Here are some of IMMFX’s best tips to help you fast-track your way out of student debt:

    1. Don’t rush to ‘upgrade’ everything all at once

    You did it—you’ve graduated and landed your first job! Congratulations for finally getting yourself out into the ‘real world.’ But that doesn’t necessarily mean that you have to stop living like a student. 

    Wait, what? Fresh graduates tend to want to make it on their own quickly, but you might not necessarily want to ‘upgrade’ your lifestyle too fast if you want to be able to save more cash and eventually pay off student loans sooner. 

    While we don’t suggest that you go back to living on an instant ramen-based diet, try to remember to prioritize essentials and invest in items that will bring longer-term benefits. As with the modest-but-functional scientific calculator that never once failed you throughout the years, you don’t necessarily need to replace your smartphone every year. And that latest model might not be spectacularly different from your current phone, anyway.

    As for rent, the biggest regular expense that people have, you might want to consider saving a few hundred dollars each month by forgoing that brand-new downtown apartment to seek a more affordable place or move back in with your parents. This can give you the time to figure out and grow comfortable with your finances. Your mother might even be glad to have you back at home… for now.

    2. Create (and stick to) a budget that’s right for you

    If you’re one of the 40% of adults who don’t actively keep a budget, then the time to start is NOW. Budgets don’t have to be complicated labyrinths of numbers—they’re simply meant for you to keep better track of where your money is going.

    One of the tips we’ve found to be highly effective, especially when actively trying to work down student loans, is taking a ‘bottom-up’ approach to creating a budget. This means immediately setting aside a portion of your monthly budget toward savings and repayments on student loans, and then working with the remainder for your day-to-day expenses. (ex. $100 salary – $10 for student loans – $15 for savings = $75 for rent, food, etc.)

    Simply put, if you start with the assumption that you are paying X amount toward your student loans every month, then you begin to develop the habit of making regular payments (which will be great for your credit rating down the line), nudging yourself toward making smarter spending choices by working with a slightly-smaller monthly budget.

    3. Always try to pay more than your minimum dues

    Paying off student debt can sometimes be a 20-year commitment. And as with any bad relationship, it’s in your best interest to get out of it as quickly as possible, which may mean making bigger payments (but only where it wouldn’t hurt to do so).

    Whenever circumstances allow, try to pay more than the minimum amount due on your student debt. A difference of 5-20 dollars made by simply rounding up to a higher amount each month can go a long way in helping you pay off your student loans a few months, or even years, earlier than expected. This can potentially save you thousands in interest payments.

    Now, there are two common ways to go about this if you find yourself trying to balance multiple debts at once:

    • Prioritize debts that carry the highest interest rates, as higher-interest debts are usually more expensive and getting them out of the way earlier leaves you with smaller, more manageable debts to deal with.
    • Prioritize debts with the lowest principal amounts first. This method works under the more modern assumption that quick ‘wins’ with smaller debts would give you the confidence and momentum to tackle progressively larger debts.

    4. Consider student debt consolidation (or forgiveness!)

    The average federal rate for student loans stands at 4.5% for undergraduates and 6.3% for graduate studies. These interest rates may not mean much at the start, but steep rates can cause headaches when you realize that it adds up quickly down the line. And even if you do feel like these are manageable, it’s always a good idea to shop around among private lenders, some of whom would offer refinancing options at considerably lower interest rates.

    However, be aware that while private lenders may offer attractive consolidation packages that allow you to focus on one larger (and less expensive) loan instead of several smaller loans, they are often not as flexible as federal financing.

    Also, some states actually offer student debt forgiveness to qualified graduates, but make sure to do your research, as these programs often only cover people in public service, who have especially repayment histories on student loans.

    5. Leave your credit cards at home (if you can)

    People with steady incomes and bank accounts are the prime targets of credit card companies, and having an available credit line is undoubtedly practical in cash-tight situations. However, studies show that consumers can spend 100% more on credit than with cash. 

    So, while your credit card company may offer attractive ‘rewards,’ be very careful to avoid adding another battlefront to your war against student loans. Remember, you’re not saving 20% on that credit card deal if you’re actually still spending 80%.

    The easiest way to prevent this from happening is by paying for everyday transactions with cash or your debit card and strictly reserving your credit card for emergencies. This may take some getting used to, but by directly spending the cash that you already have in your bank accounts, you maintain a stronger psychological connection with your money. 

    This, in turn, makes it easier to not only monitor your expenses, but also save yourself from yet another monthly bill (with so many fees!) to keep track of.

    6. Look for ways to earn (and save) while having fun

    Nope, we’re not talking about taking on an extra job or necessarily going back to your part-time student gig waiting tables at that café down the street. We’re talking more about exploring options that 1) don’t take away from your precious ‘me-time’ and 2) don’t make you feel like you’re working a second job.

    Think of how modern technology and lifestyles have allowed millions of people to monetize their hobbies, free time, or other resources by driving for Uber, putting up spare rooms on Airbnb, or walking their neighbors’ dogs every weekend, for example. 

    The payout might likely be modest, but could still contribute substantially to your savings, if not just your direct spending budget. This also has the not-insignificant bonus of knowing you’re actually helping other people go about their own busy lives. 

    And hey, at the very least, you’d actually get paid to hang out with cute little doggos!

    7. BREATHE. Don’t overstress yourself about your loans.

    Yes, this is our final piece of advice. As we mentioned at the start of this article, we get you. Dealing with student debt can involve ridiculous (even scary) timescales and monetary amounts, but it’s important to understand that you are always in control of the situation. 

    Getting out of student debt is a process, and not a race. Different solutions will work for different people, and your mission is simply to mix the right cocktail of solutions to fit your needs and lifestyle.

    So, if you’re struggling to make this month’s payment, then try to find ways to make up for it next month (or the next). Remember that you took out these loans to improve your life, and so they shouldn’t take over how you live it. 

    Don’t be afraid to splash (or at least sprinkle) some cash to take care of yourself by getting enough exercise and eating right, or to simply enjoy by engaging in hobbies and going out with family and friends once in a while.

    Speaking of friends, you’re not alone in this fight. Reach out to other people to see how they’ve been dealing with their own student loans and exchange advice. And with almost any type of content being accessible through the internet these days, student debt management tips and resources (like this IMMFX article!) are always available for you to consult in order to find ideas to try out. 

    There may not be a magic perfect solution, but approaching its challenges with the right attitude is already a great start.

     

    You’ve got this!

     

    The IMMFX Blog brings you the latest financial knowledge and trading tips to help you make smart trading and money decisions. Continue exploring our blog and website to learn more, and then open a new Prime account to be able to claim an exclusive 20% Welcome Bonus!

    IMMFX is a global STP forex broker that offers traders the best conditions and tools to start securely trading over 200 different instruments (including stocks, indices, cryptos, metals, and energies) with low spreads and latency, flexible leverage, deep liquidity, and fast execution.

    Trade Bull or Bear in the Forex Markets

    Effective long and medium-term trading strategies in all markets typically involve identifying the major underlying trend and then trading with the trend’s overall direction.

    This tends to hold true regardless of whether the trend consists of an upward trend or bull market, or a downward trend that is otherwise known as a bear market.

    Bear Markets and Stock Trading Regulations

    Because of the regulation which many traders consider to be excessive, stock traders are often limited in their ability to take short positions in stocks. This can significantly affect the scope of their trading opportunities, especially in bear markets.

    The reason for these numerous rule changes involves the stock market’s various crashes which have occurred historically. These regulations have the overall effect of making the shorting of stocks increasingly difficult in declining markets.

    Basically, traders are only permitted to short a stock on an uptick in its price. This so-called short sale rule has even been expanded recently to prohibit the shorting of financial stocks altogether when the market has declined by a certain percentage.

    In addition, because of the fact that currencies trade in pairs, all currencies cannot decline simultaneously in the forex market. This differs from stocks, which can all move down simultaneously in a typical bear market crash scenario. This is the primary reason that the short selling regulations were instituted in the first place.

    Trade Bear Markets in Forex Easily

    Unlike the stock market, the forex market is comparatively unregulated. This allows traders to sell short regardless of the direction of the last sale, which is how this regulation works in the stock market. In essence, the forex market allows traders to go short any currency pair as long as a bid price can be found in the amount they wish to deal.

    Because of the lack of restrictions in the forex market, bull and bear markets remain equally easy to trade. Also, because of its unregulated nature, moves in the forex market are usually dictated by the levels of supply and demand in the market, although at times central banks may intervene to stabilize their currency.

    Basically, the forex market allows traders a more equitable and efficient marketplace in which to operate. This makes trading just as easy in a bear market as in a bull market.

    The U.S. Dollar’s Trend Creates Bull and Bear Forex Markets

    In the stock market, individual stocks will tend to trend according to the company’s prospects and for the market generally.

    Nevertheless, stocks which perform poorly will still rise in a bull market, while high performing stocks with strong earnings will still decline in a bull market, although perhaps to a lesser degree than the overall market.

    The rough equivalent of the overall stock market for forex traders is the performance of the U.S. Dollar. Because of the Dollar’s status as the world’s premier reserve currency since the end of the Second World War, the majority of large moves seen in the forex market will either be in favor of or against the U.S. Dollar.

    Basically, since the U.S. Dollar often plays the role of market leader, its value will rise and fall against a number of other currencies simultaneously depending on economic conditions in the United States in relation to the rest of the world.

    This tends to give the impression of bull or bear markets for all currency pairs which include the U.S. Dollar as the fortunes of the United States rise or fall respectively.

    Forex; Alternative to the Stock Market

    The forex market has often been the choice for many professional traders who had previously traded in the stock and commodity markets. Some reasons for their switch are rather simple: the forex market offers greater liquidity, longer trading hours and more trading opportunities.

    Furthermore, with the advent of forex electronic trading available by connecting to the Internet, in combination with the recently available online forex retail accounts, small investors can now access and trade the multi-trillion dollar forex market that was previously only available to banks and large corporations.

    Before the Internet, small traders were largely restricted to trading stocks or commodity futures and options, where retail accounts have, for the most part, always been available.

    Also, currency futures were not made available until just after exchange rates began to float in 1972. For many years, currency futures were the only way that retail traders could participate in the foreign exchange market.

    The forex market has some clear advantages for traders which cannot be found in other markets such as the stock market. Some of these features that the forex market offers traders compared to the stock market include:

    Liquidity

    The forex market makes up the deepest and most liquid market on the planet.

    Currency trading occurs around the clock by the world’s largest banks and financial institutions and helps ensure that a market maker or dealer will always be available to take either side of a trade.

    Conversely, trading in the stock market is limited to certain hours of the day, and liquidity can become almost nonexistent in some of the smaller stocks.

    Trading Hours

    The forex market remains open continuously from Sunday afternoon until Friday afternoon EST. This means that currency traders enjoy the longest continuous trading hours of any financial instrument.

    Stock trading is limited to certain hours of the day, with some highly capitalized stocks which may be traded on overseas markets.

    Expense

    Trading stocks can be quite costly, especially for active traders since commissions can build up significantly.

    Trading currencies is considerably less expensive in comparison since most forex dealers only charge a part of the spread instead of charging a straight commission.

    This means the cost savings in trading forex over trading in stocks can be considerable.

    Leverage

    One of the best reasons to trade in the forex market consists of the amount of leverage a trader can use. Trading in stocks requires 50% of the purchase price, or a 2:1 leverage ratio, while forex trades can be leveraged by as much as a 500:1 ratio.

    Because a trade in the forex market represents an exchange of equivalent assets, there is no initial cost in establishing a position. This differs from the stock market where one is actually purchasing an asset.

    Fewer Choices for a Trading Vehicle

    In contrast to the stock market, where thousands of stocks exist, the lion’s share of trading in the forex market occurs in just eight major and minor currency pairs quoted against the U.S. Dollar and several active cross rates pairs.

    This makes choosing a currency pair to trade substantially easier than picking from among the thousands of choices in the stock market.

    Portfolio Diversification in Forex Trading

    The strategy of diversifying an investment portfolio allows the fund manager to spread risk between various different investment types with the same portfolio. In this way, they avoid having all of their investment “eggs” in one basket.

    In essence, if you keep all of your funds invested in similar securities like either bonds or stocks denominated in a single currency, then your portfolio will not be protected against adverse general moves in the relevant markets.

    Nevertheless, if you instead diversify your portfolio by placing funds in different types of investment instruments denominated in different currencies, then you will have less exposure to any one security, currency or market.

    How Portfolio Diversification Traditionally Works

    Using traditional portfolio diversification techniques, investors will often purchase a mixture of stocks and bonds to hold in their investment portfolio.

    They generally do this to protect or hedge against the risk of an economic downturn by holding bonds that will continue to pay interest, while at the same time still being able to profit from good economic times due to the probable appreciation of the equities they are holding.

    The primary disadvantage of using this strategy arises when economic conditions deteriorate and inflation eats into the investment currency’s value. When this happens, the bond interest received may not adequately compensate the investor for the loss of capital experienced on their equity investments.

    Adding a Currency Dimension to Your Portfolio

    Although Forex trading is certainly not the same as investing, those involved in investment management might wish to consider adding an extra diversification element to their portfolios in the form of using different currencies.

    Basically, given the volatility experienced in today’s relatively free floating forex market, investing in assets denominated in a foreign currency might well be something that could both enhance and protect a portfolio’s value.

    Furthermore, according to the goals of an investor, they could even choose attractive fixed income or equity assets from several different countries to add currency diversification and balance to their portfolio.

    An alternative for those who need to maintain all of their assets denominated in their local currency would be to exchange just the portion of the portfolio held in cash into a different currency. Ideally, they would choose to switch into a currency that would be expected to appreciate relative to their local currency and which may even provide a superior interest rate return on deposits.

    Investing in Currencies

    Since currencies can be looked at as the stock of a nation, investors could even elect to hold a diversified basket of currencies. This would allow them to invest in various nations that they expect to show superior growth rates and moderate inflationary pressures.

    In general, the currencies of countries which are growing well and offer higher interest rates and low inflation will tend to have a stronger currency that may well appreciate relative to the currencies of those countries that have weak economies, lower interest rates and higher inflation.

    For example, with U.S. growth flagging and its interest rates currently near zero, a U.S. based investor well might be inclined to consider alternative currencies to switching their U.S. Dollars into. Furthermore, Australia’s deposit market currently has interest rates of over four percent, and the Australian economy has shown much healthier signs of growth.

    Accordingly, the investor who switches from U.S. Dollars to Australian Dollars would benefit from an interest rate differential of roughly four percent on their cash. Also, provided that inflation remains under control in Australia, these factors should eventually lead to a higher exchange rate for the Australian Dollar versus the U.S. Dollar over time as an added investment incentive

    High Number of Participants in Forex

    Not only is the forex market the largest financial market worldwide, but it also includes a high number of participants.

    One of the primary benefits of having more active participants in a market is that it usually contributes to greater liquidity in that market.

    Advantages of Liquidity

    The basic idea behind liquidity involves how quickly you can convert an asset into cash. Of course, with currency trading, you can turn your spot trade into cash within just a couple of business days.

    When a market is highly liquid, that implies that it operates in a very efficient manner. Usually dealing spreads would also be quite competitive, with relatively low transaction costs.

    Read our previous article: Winning Forex Trade with Major Currencies

    Another advantage of high liquidity is the ability of a market to handle large transactions without the price moving too far as a result. Liquidity also generally means that orders will tend to be executed well, with minimal slippage on stop losses.

    When it comes to liquidity, the huge forex market easily comes out on top when compared to other financial markets like those for stocks, bonds, and commodities. It also offers 24-hour trading during the business week.

    Forex Participants That Help Provide Liquidity

    The main participants in the forex market that assist in providing liquidity generally fall into one of the following basic types:

    • Major Commercial and Investment Banks

      These are the big professional players in the forex market. By acting as both speculative traders and as market makers to clients and one another, their activities provide substantial liquidity to the forex market.

    • Governments and Central Banks

      These institutions can have a major impact on the forex market as they intervene to manage the exchange rate of their nation’s currency or shift currency reserves. At especially volatile times, central banks will often provide liquidity to help stabilize the forex market.

    • Large Corporations

      Many companies engage in business in other countries and this often requires that they participate in the forex market. Their hedging activities of foreign currency exposures often help provide considerable liquidity in the forex market, and they generally participate by acting as a large bank’s customer.

    • Hedge Funds

      These players largely act as speculative trades in the forex market to enhance their funds’ profits. Their large transactions can significantly increase trading volume and hence liquidity in the forex market.

    • Investment Funds

      When the managers of these funds invest internationally or shift investments from one nation’s market to another’s, they need to use the forex market to convert currencies. Usually acting as customers of large banks, their often large forex transactions, and orders, as they enter, exit and protect their foreign investments, can add significant market liquidity.

    • Individual Traders

      Such participants can range from wealthy individuals, who can often trade forex using credit lines that banks extend to them, to retail traders who participate on margin via online forex brokers. This group of participants provides an increasing amount of liquidity in the forex market.

    • Interbank and Retail Forex Brokers

      These firms act as intermediaries in forex transactions. Interbank brokers will generally only handle sizeable transactions between large banking counterparties, while retail forex brokers tend to provide access to the forex market for much smaller individual accounts. This access has made the forex market available to a much larger segment of the population and has significantly increased both the breadth and liquidity of the forex market.