Forex (Forex) is an international currency exchange market, which is based on the fact that most of the national. currencies have floating rates. It should be noted that Forex works 24 hours a day (except for some holidays and weekends). The main difference between Forex and other exchanges is that its participants make transactions via the Internet. Physically, traders are located in different countries of the world and even on different continents.

Forex participants include both financial organizations (funds, banks) and private investors who trade currencies in order to obtain profit arising from sale / purchase operations due to the difference in rates. The daily total volumes of Forex transactions are very, very huge! They significantly exceed the turnover of other markets (approximately several trillion dollars every day). First of all, this is due to the very high popularity of this market among a huge number of private investors around the world. Every year, interest in this market only increases due to the possibility of remote trading via the Internet.

Private investors usually work with small amounts through certain intermediaries, the latter are dealing centers that provide the necessary technical conditions for access to exchange rates on the market in real time, and also make it possible to conclude and execute transactions with lending (this also called). The loan is provided to the investor automatically at the time of opening the transaction and in terms of its volume exceeds the pledge amount previously deposited by the client by 50 and even 500 times! This lending scheme allows a market participant who has even a small amount to trade to receive significant profits when making transactions by increasing the size of the transaction. Due to many different factors, exchange rates are constantly in motion and change literally every minute. This makes it possible to make a significant number of transactions during the day.

What is the result of profit in Forex?

Let's take a closer look at the process of generating profit on a specific example of one completed transaction.

A commodity that is bought or sold on forex is a specific currency. Thus, the rate of one currency is always expressed in terms of a certain amount of some other currency. Let's say the rate (or cross rate) EUR / USD - indicates the value of 1 EUR, which is expressed in USD (US dollars). This rate constantly has two different values: the acquisition rate (Buy, Bid), at which this currency is taken, and the selling rate (Sell, Ask), at which, respectively, the currency is sold. Of course, the buying rate is always less (because they try to buy cheaper in the market) than the selling rate (because they want to sell more expensively). You also want to enter the market with the same goal! Take it cheap and then sell it at a higher price.

Let's consider the history of changes in such quotes as USD/JPY, at point "A" there was a value of 111.01, after a while - 109.71 (point B). Thus, the difference between quotes in the interval A-B was as much as 130 points (subtract 109.71 from 111.01). In general, this is not such a significant change if you look at it in relative terms (about 1%). However, for a trader who trades in Forex, even such an insignificant change in the rate can easily bring significant income. If the investor’s forecast at point A is that the rate will “fall” in the future, he will sell (SELL operation), and after some time, at point B, he will close the position using the reverse operation by making a purchase (BUY operation). Thus, the net profit will be 130 points. In addition, in real calculations, one should take into account the spread (this is the difference between the sale price and the purchase price), which on average can range from 1 to 10 points for different currency pairs. In our calculation, we will omit the spread value for greater convenience of calculations.

Let's calculate how much profit the investor will receive in monetary terms from this transaction? Imagine that an investor used $100 for a trade. During the purchase, the dealing center provided an automatic loan (or leverage) of 1:100, so he managed to sell currencies (at point A) not for $100, but for as much as $10,000! Given the rate of 111.01 yen for 1 dollar, we get 1,110,100 yen. Further, already at point B, he acquires dollars for this amount at the rate of 109.71 and receives $ 10,118.49. During the completion of the transaction, the loan is closed automatically (according to the leverage value, the proceeds are divided by 100) and the investor receives a net income of $101 from this operation. Compared to the initial amount used by the trader for the transaction ($100), his profit was 100% of the initial amount, he simply doubled it!

As you can see, with exchange rate changes even by 1%, investors are able to make significant profits, and after reading this material, you have learned how the forex market works. Sometimes exchange rate fluctuations even within one day can be within 200-300 points and even more!

Remember one simple rule, do not rush headlong into the pool, because you yourself know that miracles do not happen. Here the winner is not the one who guesses, but the one who “knows” in advance! In addition, there are simply no win-win strategies either, but each of them is good in its own way. Which one to choose is up to you to decide, you can even come up with a strategy yourself, read about how to do it yourself in our material. All the best.

Have you ever felt that the market seemed to be specifically set against you? Immediately after opening a trade in the direction of the trend, the trend changes, causing the trade to become unprofitable. As soon as you fix the loss, the price returns to its previous movement, and it seems as if someone is watching the trader's actions from the other side of the screen. Today we will talk about how Forex works.

It seems to me that any novice trader has this feeling. Personally, at the very beginning of trading, I even opened trading platforms of different brokers to make sure that I was not being deceived. The fact is that the Forex market works according to a certain principle, which contributes to the emergence of the situation described above. Next, that's exactly what we'll talk about.

Why the market tries to hide its true direction

So, almost all traders trade, relying on reasonable facts. That is, all external factors affect the price direction. Many novice traders mistakenly believe that a sharp change in the market can only occur as a result of unforeseen events. The fact is that many upcoming events are included in the price even before they are completed. Many experienced traders anticipate further price behavior in advance and take appropriate actions, as a result of which the publication of important news does not lead to a price change.

Usually in the market 90% of the time the price moves in the opposite direction of the publication of important news. In this case, the saying "Buy the rumor, sell the fact" works. The fact is that large players buy on a downtrend, since they have such an opportunity. Let me also remind you that market makers buy when everyone else is selling and sell when everyone else is buying. How do they recover their funds?

How the Forex market works

So, the price in the market is growing in order for the big players to make profitable sales. The price is reduced in order to give the big players the opportunity to make bargains. Forecasts about the future behavior of the price are needed only for beginners, as they do not like uncertainty, and with a forecast they feel more confident.

Professional traders do not need different forecasts, they are able to decide when to buy and sell, and can even influence the price movement.

To make money in the market, a trader must master the fact that the market is not chaotic, its movement is quite possible to predict. All currencies, stocks and bonds move in trends that keep their direction. All successful traders know this and use it for their own purposes. They buy when everyone else is selling and hold trades for a certain amount of time.

When the market will appear wishing to make purchases, they will call the major market participants. When there are bids to buy, this will stimulate the growth of quotes until all long transactions are closed. Initially, all transactions of small market participants will be closed in the footsteps. Then the price will reach important support and resistance levels, as well as Fibonacci levels.

For a better understanding, I suggest you consider a specific example. Suppose the market is in a pronounced downtrend. The bank received 800 million buy orders. The dealer is not very happy with this, he must first of all close transactions with profit or at least break even. Secondly, he must change the direction of trades, that is, open short trades. How will he act in this case?

1. Call other branches and ask them to put up a few buy deals at a higher price. He will place some orders at support and resistance levels or at the level of Fibonacci lines, which will allow the bank to get some profit from its transactions.
2. The dealer can start hunting for stop losses. Stop orders will move the bank's position to the next level, where the bank can make a few more transactions.

The bank will then close all of its buy trades and open sell trades to buy and sell on the next down wave. This was just one example of how Forex can increase the price for a certain period of time using naive traders. Paul Tudor Jones commented on this as follows: “The price provokes the appearance of news, and not vice versa. The price will move in the direction it needs to move.”

The market is deceptive for those traders who trade against the trend. Many traders try to identify reversal patterns in order to start selling or buying as early as possible. It is at this moment that greed wakes up in traders. Any price correction raises doubts among traders, as a result of which they begin to doubt the correctness of their actions. It is precisely such confusions that institutions prey on.

The main reason that novice traders get confused when the price starts to move in a direction that is unfavorable for them is that they try to adhere to the statement that in order to succeed in trading, one should try to minimize the emerging losses and maximize potential profits.

It is psychologically difficult for novice traders to perceive the occurrence of losses. For this reason, at the moment when the price changes its direction, they try to quickly close the active position and create a position in the opposite direction. Such actions rarely achieve the desired result, since the creation of orders based on emotions without prior analysis usually leads to zeroing the deposit.

In order to exclude such a development of the situation, it is recommended to develop strict discipline in yourself and trade in strict accordance with the chosen trading strategy, without succumbing to emotions. Only discipline will help you calmly wait out the moments of price level correction.

Many beginners find the foreign exchange market deceptive, as they rarely manage to guess the direction of the price movement. In fact, Forex is subject to a number of strict rules that you need to master in order to learn how to correctly determine the current market mood.

Good day, dear readers!

We have all heard about the huge opportunities to get rich by taking part in the Forex market game, but for most of us this topic remains hidden under some kind of dark veil.

Today I will make a desperate attempt to let the first ray of light and answer the "super complex" questions: what is Forex, how it works and how to make money on it. I will also lead you to understand one very important secret that always ensures the safety of 90% (!) of trading capital.

Spreads

In the stock and commodity markets, when opening and closing each transaction, a certain commission is charged, for example, 0.03% of its volume. The commission is the broker's income, without which trading would be impossible.

A broker is a company that executes a trader's trading orders (buys and sells shares, raw materials, currencies at set prices).

There are also brokers in Forex, but they profit not from commissions, but from spreads. A spread is a certain amount of money that needs to be paid only once at the time of opening a transaction.

For example, here is the spread for the USD/RUB (dollar/ruble) currency pair.

Let's calculate: 59.585 - 59.085 = 0.5 rubles. We will have to pay fifty kopecks to the broker in order to get the right to open a deal.

Spreads have their advantages, but there are also disadvantages: when they are too large, it is not possible to trade short-term or scalp (but more on that later). Of course, such huge amounts are not available in all currencies.

Most traders open trades with "major" currency pairs, where the spreads are tiny. An example is the EUR/USD pair (euro/dollar).

Let's calculate: 1.0661 - 1.0659 = 0.0002 dollars will be the broker's earnings from one transaction we open. In rubles, we will spend (if the dollar = 59.25 rubles) 0.01185.

Since the spread is charged immediately upon opening a trade, we will always see a negative value in the "Trade" tab of our terminal. For clarity, let's open a trade for the AUD/USD pair (Australian dollar/US dollar) on a demo account and look at the control menu.

We are in the red because the spread was paid from the account. we talk in a separate article.

Interbank trading

Do you listen to the economic news that is broadcast on the radio or TV? Then you probably heard such an expression as: "Moscow Exchange", maybe you paid attention to the "London Stock Exchange", "Tokyo Stock Exchange" and so on.

Exchanges, that is, buildings in which traders gather to trade - the path of the stock and commodity markets. The Forex exchange is not located in Russia, or in the USA, or anywhere else; trading is carried out exclusively on the Internet or, as traders say, on the interbank market.

The following follows smoothly from this difference.

24 hour trading

Trading on stock and commodity exchanges is conducted only at certain times, for example, the London Stock Exchange is open from 11:00 to 19:30 Moscow time, the New York Mercantile Exchange - from 16:20 to 22:30 and so on.

Of course, modern traders conduct their trades mainly via the Internet, but during non-working hours, even over the network, it is impossible to make transactions on stock and commodity exchanges.

Forex works around the clock. It is closed only on weekends (Saturday and Sunday), as well as on international holidays (March 8, New Year and others).

The features of round-the-clock trading and the sessions into which it breaks up will be discussed in the article “How to make money on Forex” - subscribe to updates so as not to miss anything.

Tick ​​trading volumes

In the stock and commodity markets, trading volumes are monetary. That is, if ten market players open one trade for $100 each, their total investment in the market will be $1,000.

In Forex, the volumes are tick - not the amount of money is fixed, but the number of open transactions. That is, if out of ten traders the first five open deals for $100, and the other five - for $1,000, the volume will be 10 - only the number of open positions will be fixed, the volume will remain hidden.

Now the difference between tick and money volumes tells you practically nothing, but this information will be very important when we consider indicator analysis in the Forex market.

Swaps

If we open a deal on the global currency market and close it the next day, that is, we make a "position transfer through the night", some numbers appear in the "Swap" column of the trading terminal, which can be positive and negative. What it is?

Opening a position in the market implies the following: we give our broker one currency, and in return he gives us another. Suppose we buy euros for dollars.

In order for the broker to give us euros, he turns to liquidity providers, which are usually large banks. Banks give the broker the euros that we need, as if on credit.

If we close our trade within one day, the broker will return the “credit” to the suppliers and will not pay any interest, but if the position rolls over overnight, the broker will have to pay interest. He himself does not want to do this and lays the costs on the trader. The latter will see them in the "Swap" column.

So far, everything is probably clear. Questions appear when the "Swap" indicates not a negative value (which, in theory, should be), but a positive one. Where could it come from?

The point is the following. The broker borrows the currency we need, but why shouldn't he use the money we gave him in return? Will the dollars we exchanged for euros just lie there? Of course not.

The broker gives the money received from the trader to the same liquidity providers so that they “scroll” it and then return it with a percentage. If we close the position during the day and demand our dollars back, the broker will not receive a percentage of them. But if we hold the trade and exit the market the next day, the suppliers will return a larger amount.

The swap will be positive if the interest earned on the dollars invested by the broker is greater than the interest on the loan on the euros he borrowed. This value depends on the interest rate - it will be discussed again in the article on. At the moment, the interest rate in the US is higher than in Europe, so the euro/dollar swap is negative (as seen in the screen above).

In a separate article, we analyze this concept in detail with examples.

Now you have a more detailed idea of ​​what Forex is, right? Afterwards, just be amazed at how your knowledge will grow.

Forex - scam or not?

Surely you have already been interested in this issue on the Internet, right? If so, then you will definitely come across information about fraudulent brokers, fictitious quotes that show terminals, instantly evaporating investments in PAMM accounts, and so on.

Another interesting option that I observed in many reviews: “I just opened a deal, and the price immediately went back, I was taken out by the stop, and the rise began again!”. One gets the feeling that indeed brokers are only engaged in robbing novice traders - innocent sheep.

In fact: according to statistics, 80% of all beginner stock speculators drain all their money in the first year of trading. Hence the mass of negative reviews on the websites of brokerage houses. But the question arises: is the market to blame? Professionals, oddly enough, consistently earn.

I witnessed a case when a successful trader, who had been “living” in the market for about fifteen years, suddenly “merged”: he overloaded the deposit and left it for the weekend when Forex was closed. Contrary to the expectations of many, a month later he was back in the game, a month and a half later he restored his deposit from $40 to the previous $1,000. Don't believe?

Let's leave the answer to the question that puzzled us for now and will not directly call Forex a scam, fraud, etc. In the next article, I will give you a technique (“secret” mentioned at the beginning), trading by which you can protect against losses of 90% your initial capital (that is, the maximum that you will lose from, for example, 10,000 rubles invested - only 1,000, and then in the worst case). You will learn why Forex is not a scam at all and why you can successfully earn very good money here.

We don't say goodbye, see you soon!

Hello, dear Readers of the site "site"! This review reveals the topic of what are the principles of its work and how it works. Additionally, information is disclosed about who are traders, brokers and regulators in the financial markets.

In this article, we will reveal detailed information about the participants in financial markets and describe the device, the principle of Forex operation. Also, the essence of interaction with each other of all participants of the international Forex currency market is revealed.

1. What is Forex

The Forex currency exchange is an international market where all the currencies of the world are exchanged between its participants - traders and investors. They are the basis for the existence of the currency and stock exchanges, creating supply and demand in the financial markets.

The main participants in this market are:

1. Buyers and sellers - traders, investors.
2. Participants providing the opportunity to trade on Forex are brokers.
3. Participants who regulate the relationship between a trader and a broker and - regulators.

2. Who are Forex investors and traders

These are the main participants in the international currency market, thanks to which Forex was created. They fall into two categories: sellers and buyers.

Sellers, based on their name and actual needs, sell trading assets, and buyers buy it accordingly.
A trader can be any individual of legal age or a legal company. To start trading, they need to register with a broker and open a trading account for their trading activity.

Trading traders in the foreign exchange market generates supply and demand in the financial markets. Thanks to, volatility and liquidity are formed for trading instruments on the exchange.

The trader's profit is formed from the correct determination and forecast of the further rate of the currency pair. At the same time, a trader does not need to have a huge starting capital to start trading. Using the leverage offered by brokers, a trader can start trading even with $100 on his deposit.

Using leverage, it is enough for a trader to have a minimum deposit (according to the conditions of the broker) to start his trading.

For example, to conclude a trade deal with a volume of 100,000 US dollars, a trader's trading account should have about 1,000 US dollars - while the leverage can reach 1:100.

In many brokers, leverage reaches up to 1:1000, which requires only $100 to open a $100,000 position. To be clear, it should be understood that to open a $100,000 position without leverage (leverage 1:1), a minimum of $101,000 is required.

It is important to understand that with a high leverage, the trading risk and the likelihood of losing your deposit from such trading increase significantly.

2. Who are stock brokers

These are members of the international Forex exchange, which provide an opportunity for a trader to conduct trading activities in the currency and other financial markets. are intermediaries between traders and the Forex exchange itself. Brokers do not enter into trading transactions themselves, but conduct them on behalf of the trader, through their liquidity providers and large banks.

Earnings in a brokerage company are formed at the expense of a commission from each concluded trade transaction by traders. At the same time, it does not matter whether the trade deal was unprofitable or profitable for the trader himself.

The broker always receives his commission!

3. Who are the regulators in the financial markets

Activities and relations between traders and brokers are regulated in the currency markets by the relevant authorized bodies. Their activities are related to the verification of the implementation of the rules for the provision of services by brokerage companies in the financial markets. have the right to deprive brokers of licenses, and to remove them from Forex activities in general, if they have violations.

Summarizing

All participants in the international currency and stock markets closely interact with each other. In the event that one of the "schemes" of the exchange's work exits, the rest of the participants will not be able to exist and work without them.

The name Forex is an abbreviation of two words: Foreign Exchange, that is, foreign exchange. This is the name given to the market in which currencies are exchanged at a free rate. The exchange rate itself is formed on the basis of the balance of supply and demand. Common is the phrase Forex market, or FX-market to refer to the Forex market. Let's consider in more detail how the forex market works and how you can earn by trading on it.

Forex in the everyday sense is associated with the majority of speculative currency trading. Almost always, such trading is carried out with the help of leverage provided to traders by forex brokers, so traders get the opportunity to start trading on Forex with a very small amount of funds. Forex brokers are commercial banks and dealing centers. Forex trading refers to marginal types of trading, that is, Forex brokers charge a fee for their services in the amount of a certain margin, that is, a percentage.

Operations in the Forex market are not limited to trading operations, when a trader simply buys a certain currency for another at a set rate. There can also be speculative operations, when the trader's goal is to profit from trading operations for buying and selling currencies, as well as hedging operations, which are concluded to insure undesirable price changes when the trader bets both up and down at the same time. There may also be regulatory transactions with foreign exchange undertaken by the Central Bank of the Russian Federation as part of foreign exchange interventions carried out if necessary to adjust the national currency exchange rate.

How did the Forex market originate?

It all started on August 15, 1971, when, by decision of US President Richard Nixon, the gold standard was canceled, that is, the US national currency was no longer freely convertible into gold. This decision meant that the US unilaterally canceled the Bretton Woods agreements. Recall that these agreements determined the backing of the dollar with gold, and all other currencies with the dollar.

After the abolition of the Bretton Woods agreements, which allowed the exchange rate to fluctuate no more than 1% compared to the dollar, in the Smithsonian agreement signed in December 1971, this fluctuation was increased to 4.5% and up to 9% for currency pairs in which dollar is not included. A new currency system to replace Bretton Woods was adopted in March 1971 on the island of Jamaica by twenty states (by the way, the USSR was not among them). The main change adopted in Jamaica was to abandon the gold standard, as a result of which the price of gold became floating, which was immediately reflected in the change in the exchange rates of world currencies. Thus, the beginning of foreign exchange trading was laid in 1971 with the adoption of the Jamaican monetary system. Naturally, such global changes in the economy could not go smoothly. Cardinal problems were immediately outlined, for the solution of which the heads of governments of France and Germany met in 1975, who proposed that the heads of the United States, Great Britain, Germany, France, Japan and Italy meet to resolve the issue. The meeting took place in Rambouillet and was aimed at transforming the structure of the international monetary system so that it meets the new requirements of the times. This summit later, when Canada joined them, was called the G7 summit. From 1998 to 2014, Russia was also a participant in this summit.

In 1976, at a meeting of ministers of countries that are members of the IMF, held in Jamaica in Kingston, a series of amendments to the IMF charter were adopted, according to which the old Bretton Woods monetary system was officially replaced. The binding of the national currencies of the IMF member countries to gold and to the dollar was abolished. This agreement, however, was approved by the IMF only in 1978. But since this year, exchange rates have become floating, which made it possible to trade currencies on the market at free prices, depending on the balance of supply and demand at the time of the transaction. The currency market is called the foreign exchange market, or Forex.

As a result of these changes, the market has changed dramatically, in particular:

1. Participants in the commodity market were forced to join the foreign exchange market due to the fact that the result of their work was directly dependent not only on their own work, but also on currency fluctuations. Naturally, they also wanted to gain influence on the change in exchange rates;
2. For financial instruments of the state, including the Central Bank, it became possible to influence the exchange rate of the national currency using the market method;
3. The rates of national currencies began to form as a ratio of supply and demand, which caused a constant change in the rates of all currencies. Courses have become floating.

How much money is rotated in the Forex market

Every year the Forex market accumulates more and more money supply. If at the very beginning of the functioning of the forex market in 1977, the daily turnover was equal to only $ 5 billion, then at present the daily turnover reaches 5.3 trillion dollars, and this number is constantly increasing! Moreover, in geometric progression: if in 2013 the acceleration of daily turnover growth was equal to 9%, then in 2010, compared to 2007, the growth in turnover was already 21%, and in 2013, compared to 2010, daily turnover increased by 32.5 percent .

Analysts predict an increase in daily turnover in the Forex market to 10 trillion dollars by 2020.

The Forex market is surveyed every three years by the Bank for International Settlements. This order was introduced in 1989. The results of the study, containing data on the structure, dynamics and turnover of the market, are published on the official website of BIS (Bank for International Settlements). The last report was published at the end of 2016.

However, the information may be inaccurate due to the fact that Forex trading is not an exchange type of trading and, accordingly, the requirement for mandatory publication of data on Forex transactions does not apply. The guarantee of liquidity in the Forex market is a large volume of daily turnover. Taking into account the fact that, under the terms of the margin market, the parties to the transaction can enter into contracts for amounts greater than the size of the capital of the parties, this condition ensures a huge amount of turnover per day.

The main participants of the Forex market

Forex is an international interbank market where fairly large companies can participate, starting with brokerage and dealer companies, commercial, investment and central banks, pension funds and insurance companies, and ending with transnational corporations. For estimation, we can say that on average the volume of one transaction on spot terms, when the real delivery of the currency is carried out on the next business day, is approximately 5 million US dollars or a similar amount in other currencies. At the same time, on average, from $60 to $300 is paid for currency conversion. Forex market participants bear obligatory monthly expenses for payment for the interbank information and trading terminal, which is about $6,000. That is, a serious level of overhead costs does not allow small companies to enter the Forex market to convert the minimum amounts of currency. However, intermediaries, the same banks and currency brokers can carry out currency conversion, taking a much lower percentage as payment. This possibility arises due to the fact that a large number of multidirectional conversion requests forces banks to carry out the conversion bypassing Forex, due to internal clearing, that is, mutual offset. Thus, the bank earns its own interest, which at the same time is significantly less than if the conversion was carried out directly through the Forex market.

The exchange rate set in the Forex market is used as the current rate for transactions carried out within the country without entering the Forex market. At the same time, national banks are forced to adhere to the Forex market quotes and set proportional exchange rates for currencies within the country, despite the level of demand and supply of currency within the country. For example, if inside the country the dollar rate against the euro should fall due to increased demand for the euro, but if the situation is opposite on the Forex market and the dollar rate is growing, then the current dollar quotes will be set in accordance with the exchange rate adopted in Forex.

Numerous forex brokers mainly offer speculative leveraged currency margin trading. Brokers can provide commissions on such transactions that are much lower than the commissions of the Forex market. This is due to the fact that, in fact, brokers do not go to Forex, that is, they do not conclude real transactions for buying and selling currencies on the Forex market, due to the short duration of transactions. But brokers earn their commissions, often in the form of a spread, that is, the difference between the buying and selling price of a currency at one point in time, set by the broker. In view of this, the operations of forex brokers do not affect the real exchange rate.

Moreover, Forex has recently begun to use the Electronic Communication Network (ECN) trading system, which directly connects the trader with the market participant who has an offer corresponding to his application in order to eliminate brokers from the trading process.

Regulation of the Forex market by the state

The Forex market itself, since it is international, cannot be regulated by any state when conducting currency exchange transactions. The exchange rate is not approved "from above", but is set according to the principle of free conversion based on the ratio of supply and demand in the market. Accordingly, no restrictions on prices and volumes of foreign exchange transactions can be applied. But intermediaries - brokerage organizations that provide access to the Forex market in each country, are regulated by the state in relation to the rules of the relationship between the client and the brokerage company.

The institutions that regulate Forex brokers in the UK include the Financial Services Authority (FSA): Financial Services Authority.

For the US, the same functions are performed by the Commodity Futures Trading Commission (CFTC): Commodity Futures Trading Commission. Also in the US there is the National Futures Association (NFA, National Futures Association), which includes American brokers. NFA collects reports from them, resolves conflict issues, develops trading rules and conditions for the provision of services by brokers. These rules are mandatory and individual traders do not do business with brokerages that do not comply with the NFA requirements. In fact, the requirements set by the NFA are much more stringent than the FSA rules.

After the 2008 crisis, the government introduced restrictive measures that affected US citizens. For them, with the introduction of the Dodd-Frank law on July 15, 2011, a ban on over-the-counter transactions with financial instruments was included. The rule applies to both individuals and legal entities.

Regulation of the Forex market in Russia

Talking about how does the forex market work, It should be noted that in Russia the control functions for conducting transactions with currencies are assigned to the Central Bank of the Russian Federation. The difficulty is that the laws of Russia do not provide for the possibility of carrying out operations to convert foreign currencies for citizens. In view of this, brokerage and dealer organizations, from the point of view of the law, do not have the right to provide services in the financial field. Therefore, dealers work on the basis of a betting license for the organization and maintenance of sweepstakes and gambling establishments, issued by the Federal Agency for Physical Culture, Sports and Tourism. Most dealers are registered offshore, and on the territory of the Russian Federation they often conduct their activities also unofficially, at best through representatives who are not registered to provide relevant services on behalf of the organization. Basically, services are provided only through the Internet.

Russian clients do not have the opportunity to somehow protect their rights in the event of disputes, since the activities of brokers registered offshore are carried out on the basis of the legislation of the country of registration, and representative offices in Russia, even if they exist, are not legally responsible for the actions of the company, which they supposedly represent. Thus, in order to resolve the dispute, the client will be asked to submit an application to the London Arbitration Court. It turns out that in order to work on Forex through brokers registered in foreign countries, a trader must refuse to protect his rights in advance. Or act through Forex dealers registered in Russia, which is not always possible due to the special qualification requirements for traders in this case.

Since 2003, the KROUFR (Commission for the Regulation of Relations of Financial Market Participants) has been protecting the rights of traders in Russia. Participants of KROUFR must comply with the decisions of the Commission without fail.

According to the Letter of the Federal Service for Financial Markets of the Russian Federation No. 09-VM-02/16341 dated July 16, 2009, Forex is not recognized as related to the activities of professional participants in the securities market. Thus, the activities of performing operations on the Forex market are not regulated by the legal acts of the Federal Financial Markets Service of the Russian Federation and cannot be licensed by the Federal Financial Markets Service. And only a few years later, the Central Bank of the Russian Federation intervened and began to regulate this market on its own, issuing its own licenses for such activities.

The lack of a clear legal definition of the activities of forex brokers in Russia creates situations where companies imitate the activities of such companies that they claim to accept money from investors for trading on the Forex market, but in fact the company simply disappears with clients' money. About ten such companies are identified every year.

Changes in the legislation relating to the activities of companies operating in the Forex market were adopted in 2014, when the State Duma of the Russian Federation adopted an addition to the law "On the securities market" in the form of an article "Activities of a forex dealer". The article defines the activity of a dealer as "conclusion on its own behalf and at its own expense of agreements with individuals on participation in unorganized auctions." According to the law, the text of an agreement with an individual who is not an individual entrepreneur is subject to registration with the SRO of forex dealers. Participation in the SRO is mandatory for registration of a Forex dealer in accordance with Russian law. SRO protects the rights of a trader in case of disputes with a dealer participating in SRO. The compensation fund, which is formed by dealers upon joining the SRO with contributions in the amount of 2 million rubles, serves to make payments to traders in case of violation of the terms of the agreement by the dealer. In addition, each forex dealer must have own funds in the amount of 100 million rubles for registration.

In accordance with the amendments to the law, from January 1, 2016, only forex traders can operate in the territory of the Russian Federation.

To obtain a license, a forex trader must be a member of an SRO. There are only eight at the moment.

Taxation of Forex dealers in the Russian Federation

Forex dealers registered in Russia are taxed in accordance with the legislation of the Russian Federation. Dealing center is subject to income tax. A gambling business tax in the amount of 100 minimum wages per cash desk is levied on a bookmaker's office. Additional services in the form of education, training and consultations are subject to income tax and value added tax. If we are talking about forex brokers registered in foreign countries, then the obligation to pay taxes for them arises only if they operate through a permanent establishment in Russia.

Traders pay income tax at the standard 13% rate. Moreover, if a trader conducts business through a forex dealer with a Russian license, the obligation to pay taxes on his income falls on the dealer, who acts as a tax agent for the trader.

Forex market in the Islamic world

Forex trading for Muslims is prohibited due to the fact that this trading is a currency speculation, which is contrary to Islamic law. The ban was issued in 2012 by the Malaysian National Fatwa Council, which declared it haraam for Muslims to engage in trading. However, for banks, work in the Forex market is not prohibited.

Risks of traders trading on the Forex market

Since exchange rates in the Forex market are in constant motion under the influence of contradictory factors, this movement is difficult to predict and can be the cause of high risks. This risk is multiplied when using leverage.

However, although these risks are universal and always exist, each broker introduces its own share of risks into the trader's activity, which are associated with the following circumstances:

1. Under the terms of the agreement with the broker, there may be no guarantee of the obligatory execution of orders, that is, orders for transactions at predetermined prices. Obviously, such conditions will necessarily lead to the loss of money on the part of the trader;
2. Some brokers allow independent sharp changes in quotes with the same sharp return to the original state. Such changes are usually not confirmed by independent sources of quotes, that is, we are talking about fraud on the part of the broker. An increase in the number of cases of fraud in the field of non-banking currency trading was noted as early as 2007 by the US Commodity Futures Trading Commission (CFTC);
3. Finally, if the broker is declared bankrupt, the clients' accounts will be frozen and it will be impossible for them to get their money back.

Notifying traders of risks is the responsibility of brokerage houses, and failure to comply with this obligation, as well as the assignment of non-existent titles and permits, and the promise of constant profits are treated as fraud by US law.

With such an accusation, the company can be closed, forced to pay compensation to the affected traders or to compensate for the losses caused. Even brokers registered offshore can be prosecuted with license suspension if the government of these countries considers the activities of the broker to be a threat to the national security of the republic, as well as to protect the reputation of the state that issued the license to the unscrupulous broker.

Fraud is often detected during the trust management of the client's money in the Forex market, therefore, trust management of exclusively cash is prohibited in Art. 1013 of the Civil Code of the Russian Federation. To minimize the threat of fraud, many trading platforms provide individuals who have placed their funds in trust with a trader with tools to monitor their funds. This measure reduces the possibility of fraud in relation to these funds.

What are Forex Kitchens?

This is the name of the internal clearing scheme, when the broker does not enter the Forex market at all, but satisfies clients' orders to buy or sell currency at the expense of internal funds, when each request for a transaction is satisfied if there is an opposite request from another client. If there is no counter order at the moment, the broker can act as the second party to the transaction independently. However, this leads to the fact that in this state of affairs, the broker becomes interested in receiving a loss for the client, since otherwise the broker himself loses money. Accordingly, although internal clearing is more convenient due to the fact that the speed of processing requests increases and the cost of such operations is very low, but in such situations, when a conflict of interests of a broker and a trader turns on, only entering the Forex market can be called the best way out, despite the fact that this entails an increase in the overhead costs of the broker.

Due to such ambiguous moments, in some countries internal clearing is prohibited by law, since there is a possibility of committing fraudulent actions under this scheme. However, criminal sanctions for such schemes apply only to assets that are actually traded on the exchange, which generally does not apply to the activities of brokers, since Forex trading is not carried out through the exchange. Accordingly, the Forex market is not subject to government regulation.

Brokers are not required to publish reports, so the extent to which internal clearing is applied to brokers' transactions cannot be reliably determined. As long as brokers are not legally required to disclose their transactions to controlling organizations, we can only make assumptions about the percentage of transactions made under the internal clearing scheme in the total volume of transactions of a Forex broker.