Introduction to Foreign Exchange Market

The international exchange market, often called the foreign exchange market or FX for short, is the world's largest financial market. In this market, currency is bought, sold or exchanged for one currency by another. Unlike the stock market, it does not need to exchange and trade at the counter, that is to say, all participants conduct transactions through the global network of financial institutions such as banks and brokers.

As a global market, the foreign exchange market is open 24 hours a day and 5 days a week. Major financial centres are located in almost any time zone - London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney. According to the specific active trading period, the global foreign exchange trading can be divided into three periods: Asia, Europe and America.

Quote shows how much the quote (second) currency is needed to buy or sell the base (first) currency. The exchange rate is driven by supply and demand: when the demand for a currency is greater than the supply, the value of the currency usually rises, and if the demand for the currency is less than the supply, its value will fall. In addition, price fluctuations are also affected by economic, social and political events and can occur within 24 hours.

The political situation and the economic performance of the countries concerned have a profound impact on currency prices. For example, countries with low inflation rates often see an increase in the value of their currencies relative to that of their trading partners. Inflation is also highly correlated with central bank interest rates: lower interest rates drive the exchange rate down, and vice versa.

Another determinant of price setting is the orders of participants in the foreign exchange market, and the different volumes they generate will have different effects.

Governments and central banks such as the European Central Bank, the Bank of England and the Federal Reserve of the United States have the largest monetary reserves and therefore have the greatest impact on the exchange rate. The central bank regulates inflation, money supply, interest rates and regulates the commercial banking system. They can use foreign exchange reserves to intervene in the market to stabilize the exchange rate or achieve specific economic goals.

The second most influential group includes the so-called interbank markets formed by major banks and banking associations. Through their transactions with each other, they determine the monetary price that individual traders see on the trading platform. As foreign exchange trading is a decentralized market, you can often see that the exchange rate of the same currency is slightly different in different banks. MaxxEmpire customers can get the best buying / selling price from our huge liquidity pool.

Another group of foreign exchange participants are brokerage companies acting as intermediaries between individual investors and the market. They use electronic communication networks (ECNs) to offset customers' orders, and their liquidity providers include various financial institutions. When executing orders, this mode of execution eliminates conflicts of interest between brokers and customers. An ECN broker, unlike a market maker, earns profits through commissions or spreads on each order. You can learn more about ECN implementation here.

An ECN broker allows individual investors to enter the foreign exchange market, which was originally a large financial institution, to profit from price fluctuations. Although daily price fluctuations seem small, usually less than 1%, the use of leverage can increase the value of these movements.

Traders interact with brokers through a trading platform - software that can buy and sell currencies. It can be installed on desktops, mobile devices, and even accessed through a web browser.

In selecting foreign exchange brokers, various factors need to be taken into account, such as:

  • Reliability
    It is highly recommended that you know the ratings and reviews of a broker before investing. MaxxEmpire provides the most secure and reliable services to our clients in accordance with major international laws and regulatory actions.
  • Execution of Transaction
    MaxxEmpire execution model eliminates the conflict of interest between clients and agents: as an intermediary between you and the real market, we bring competitive prices through our huge liquidity pool to offset individual orders. You can ensure that our transaction speed is less than 0.1 second, and MaxxEmpire clients will not encounter any requotes.
  • Spread
    In general, the spread can be fixed or floating: the former remains unchanged when the price changes, while the latter changes according to the market conditions and is usually smaller than the fixed spread. It is important to consider that the lower the spread, the less you pay for each transaction. Our low floating spreads ensure low transaction costs and accurately reflect the market's supply-demand relationship.
  • Trading Tools
    Every trader expects diversification: a wider range of trading tools allows you to choose the trades you are good at, and leaves room for trying other currency pairs. Our amazing trading tool options let you choose the markets you are interested in. The full list can be found here.
  • Minimum Deposit Needed
    What is more important for new investors is the transaction threshold, which depends on the minimum deposit amount. You can start investing in MaxxEmpire with only 5 $ / € 5 as your initial capital. It can help you try a variety of technologies, apply different trading strategies, and prepare you for truly serious trading. The good news is that the maximum deposit amount is unlimited!
  • Financial Security
    Keeping your funds safe is paramount when investing. MaxxEmpire implements SSL encryption to protect personal accounts. All measures are taken ensure the security of financial information and guaranteed that it will not be obtained by any third party.
  • Negative Balance Protection
    The negative balance protection function can protect traders in the event of a sudden market transaction: if the balance of the trader is negative, MaxxEmpire will make up to zero. Therefore, your loss will not exceed your deposit. The negative balance protection function comes in handy in a changing economic environment: In 2015, after the Swiss franc incident, MaxxEmpire compensated customers' negative assets to zero, at which time some brokerages went bankrupt.
  • Account Type
    Choosing an account type that is appropriate for your level of trading experience is essential to ensure that you can make the most of your trading potential. The scope of our trading account allows traders with different experience values and needs to operate their funds accordingly: the mini account allows new investors to practice with a minimum of $5 deposit, while the real ECN account provides more extensive trading tools for experienced traders. You can compare account types here.
  • Leverage
    Since daily price fluctuations seem small (usually less than 1%), it is important to choose a broker that offers a variety of leverage. The higher your ratio, the less money you need to hold a position. We provide flexible leverage system with ratio up to 1: 500.
  • Trading platform
    When choosing a trading environment you need to consider the general availability of the platform, compatibility with your equipment and the number of trading tools available for technical analysis trading. We provide you MetaTrader4 platform that supports desktop, mobile and web platform versions. Click here to compare trading platforms.
  • Client Service
    If any issues arise with the transaction, customer support will provide the trader with relevant information to help you resolve the issue. Our award-winning client support is available 24 hours / 5 days. It only takes about 5 minutes on average to help you solve even the most complicated problems.

Due to the large volume of daily trading, sufficient liquidity, 24/5 operating time and low cost, foreign exchange market stands out compared to other markets. It gives traders more flexibility in choosing how and when to trade, while also providing considerable leverage and low spreads. You can learn more about the advantages of the foreign exchange market here.