Forex trading online wikipedia
Electronic or scripless tradingsometimes called e-trading or paperless trading is a method of trading securities such as stocksand bondsforeign exchange or financial derivatives electronically.
Information technology is used to bring together buyers and sellers through an electronic trading platform and network to create virtual market places. Electronic trading is in contrast to older floor forex trading online wikipedia and phone trading and has a number of advantages, but glitches and cancelled trades do still occur. For many years stock exchanges were physical locations where buyers and sellers met and negotiated.
Exchange trading would typically happen on the floor of an exchange, where traders in brightly colored jackets to identify which firm they worked for would shout and gesticulate at one another forex trading online wikipedia a process known as open outcry or pit trading the exchange floors were often pit-shaped — circular, sloping downwards to the centre, so that the traders could see one another.
With the improvement in communications technology in the late 20th century, the need for a physical location became less important and traders started to transact from remote locations in what became known as electronic trading. Set up inNASDAQ was the world's first electronic stock market, though it originally operated as an electronic bulletin board [ citation needed ]rather than offering straight-through processing STP.
By investment firms on both the buy side and sell side were increasing their spending on technology for electronic trading.
Traders also increasingly started to rely on algorithms to analyze market conditions and then execute their orders automatically. The move to electronic trading compared to floor trading continued to increase with many of the major exchanges around the world moving from floor trading to completely electronic trading. While the majority of retail trading in the United States happens over the Internet, retail trading volumes are dwarfed by institutional, inter-dealer and exchange trading.
However, in developing economies, especially in Asia, retail trading constitutes a significant forex trading online wikipedia of overall trading volume . For instruments which are not exchange-traded e. US treasury bondsthe inter-dealer market substitutes for the exchange. This is where dealers trade directly with one another or through inter-dealer brokers i. They acted as middle-men between dealers such as investment banks. Forex trading online wikipedia type of trading traditionally took place over the phone but brokers moved to offering electronic trading services instead.
Similarly, B2C trading traditionally happened over the phone and, while some still does, more brokers are allowing their clients to place orders using electronic systems. Many retail or "discount" brokers e.
Charles Schwab forex trading online wikipedia, E-Trade went online during the late s and most retail stock-broking probably takes place over the web now. Larger forex trading online wikipedia clients, however, will generally place electronic orders via proprietary electronic trading platforms such as Bloomberg TerminalReuters XtraThomson Reuters EikonBondsPro, Thomson TradeWeb or CanDeal which connect institutional clients to several dealersor using their brokers' proprietary software.
For stock trading, the process of connecting counterparties through electronic trading is supported by the Financial Information eXchange FIX Protocol. Used by the vast majority of exchanges and traders, the FIX Forex trading online wikipedia is the industry standard for pre-trade messaging and trade execution. While the FIX Protocol was developed for trading stocks, it has been further developed to accommodate commodities,  foreign exchange,  derivatives,  and fixed income  trading.
For retail investors, financial services on the web offer great benefits. The primary benefit is the reduced cost of transactions for all concerned as well as the ease and the convenience. Web -driven financial transactions bypass traditional hurdles such as logistics. Exchanges typically develop their own systems sometimes referred to as matching enginesalthough sometimes an exchange will use another exchange's technology e.
Exchanges and ECNs generally offer two methods of accessing their systems —. From an infrastructure point of view, most exchanges will provide "gateways" which sit on a company's network, acting in a manner similar to a proxyconnecting back to the exchange's central system. Many brokers forex trading online wikipedia their own systems, although there are some third-party solutions providers specializing in forex trading online wikipedia area.
Some banks will develop their own electronic trading systems in-house, but this can be costly, especially when they need to connect to many exchanges, ECNs and brokers. There are a number of companies offering solutions in this area. Many types of algorithmic or automated trading activities can forex trading online wikipedia described as high-frequency trading HFTwhich is a specialized form of algorithmic trading characterized by high turnover and high order-to-trade ratios.
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Foreign exchange fraud is any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market.
Currency trading became a common forex trading online wikipedia of fraud in earlyaccording to Michael Dunn of the U. Commodity Futures Trading Commission. The foreign exchange market is at best a zero-sum game meaning that whatever one trader gains, another loses. However, brokerage commissions and other transaction costs are subtracted from the results of all traders, making foreign exchange a negative-sum game.
Frauds might include churning of customer accounts for the purpose of generating commissions, selling forex trading online wikipedia that is supposed to guide the customer forex trading online wikipedia large profits,  improperly managed "managed accounts",  false advertising,  Ponzi schemes and outright fraud. Commodity Futures Trading Commission CFTCwhich loosely regulates the foreign exchange market in forex trading online wikipedia United States, has noted an increase in the amount of unscrupulous activity in the non-bank foreign exchange industry.
The foreign exchange market is a zero sum game  in which there are many experienced, well-capitalized professional traders e. An inexperienced retail trader will have a significant information disadvantage compared to these traders. Retail traders are, almost by definition, undercapitalized. Thus, they are forex trading online wikipedia to the problem of gambler's ruin: In some variations of forex trading, the customers do not obtain normal fungible futures, but instead make a contract with some named company.
Even if the company claims to act as their "forex dealer", it is financially interested in making the retail customer lose money. The contract is directly between the customer and the pseudo-dealer, so it is an off-exchange one; it cannot be normally registered and traded on futures exchanges.
Although it is possible for a few experts to successfully arbitrage the market for an unusually large return, this does not mean that a larger number could earn the same returns even given the same tools, techniques and data sources.
This is because the arbitrages are essentially drawn from a pool of finite size; although information about how to capture arbitrages is a nonrival goodthe arbitrages themselves are a rival good. To draw an analogy, the total amount of buried treasure on an island is the same, regardless of how many treasure hunters have bought copies of the treasure map.
By offering high leverage some market makers encourage traders to trade extremely large positions. This increases the trading volume cleared by the market maker and increases their profit, but increases the risk that the trader will receive a margin call. While professional currency dealers such as banks and hedge funds tend to use no forex trading online wikipedia than To aid with transparency, some regulatory authorities publish in to public domain the following: From Wikipedia, the free encyclopedia.
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Bureau de change Hard currency Currency pair Foreign exchange forex trading online wikipedia Currency intervention.
In finance, an electronic trading platform also known as an online trading platform forex trading online wikipedia, is a computer software program that can be used to place orders for financial products over a network with a financial intermediary.
Various financial products can be traded by the trading platform, over a communication network with a financial intermediary or directly between the participants or members of the trading platform. This includes products such as stocksbondscurrenciescommoditiesderivatives and others, with a financial intermediary, such as brokersmarket makersInvestment banks or stock exchanges. Such platforms allow electronic trading to be carried out by users from any location and are in contrast to traditional floor trading using open outcry and forex trading online wikipedia based trading.
Sometimes the term trading platform is also used in reference to the trading software alone. Electronic trading platforms typically stream live market prices on which users can trade and may provide additional trading tools, such as charting packages, news feeds and account management functions. Some platforms have been specifically designed to allow individuals to gain access to financial markets that could formerly only be accessed by specialist trading firms.
They may also be designed to automatically trade specific strategies based on technical analysis or to do high-frequency trading. Transactions have traditionally been handled manually, between brokers or counterparties. However, starting in the s, a greater portion of transactions have migrated to electronic trading platforms. These may include electronic communication networksalternative trading systems" dark pools " and others.
The first electronic trading platforms were forex trading online wikipedia associated with stock exchanges and allowed brokers to place orders remotely using private dedicated networks and dumb terminals.
Early systems would not always provide live streaming prices and instead allowed brokers or clients to place an order which would be confirmed some time later; these were known as ' forex trading online wikipedia for quote ' based systems.
Trading systems evolved to allow for live streaming prices and near instant execution of orders as well as using the internet as the underlying network meaning that location became much less relevant. Some electronic trading platforms have built in scripting tools and even APIs allowing traders to develop automatic or algorithmic trading systems and robots.
The client graphical user interface of the electronic trading platforms can be used to place various orders and are also sometimes called trading turrets though this may be a misuse of the term, as some refer to the specialized PBX phones used by traders. During the period from tothe development and proliferation of trading platforms saw the setting up of dedicated online trading portals, which were electronic online venues with forex trading online wikipedia choice of many electronic trading platforms rather than being restricted to one institution's offering.
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