The Forex market (Foreign Exchange or FX) is the largest financial market in the world, where various currencies are traded against each other. This market is decentralized and operates through a network of banks, financial institutions, brokers, and individual traders worldwide.
Forex is highly attractive to traders due to its high liquidity, 24 hour accessibility (except on weekends), and profit potential from price fluctuations. Trading in this market involves buying and selling currency pairs (such as EUR/USD or GBP/JPY), where the value of one currency is measured against another.
Overall, Forex can be both a profitable and high risk market, as economic factors, political events, and global occurrences can quickly impact currency prices. Success in Forex requires knowledge, strategic planning, and precise risk management.
Is Trading in the Forex Market Profitable?
Trading in the Forex market can be profitable, but not for everyone. Due to its high liquidity, constant volatility, and numerous trading opportunities, Forex offers significant profit potential. However, it also comes with substantial risks.
To achieve consistent profitability in Forex, traders must follow these key principles:
Knowledge & Skills: Understanding technical analysis, fundamental analysis, and market psychology is essential.
Risk Management: Setting Stop Loss and using proper money management strategies can prevent significant losses.
Emotional Control: Fear and greed are the biggest enemies of traders, leading to impulsive decisions.
A Well Defined Trading Strategy: Entering the Forex market without a tested and structured trading plan is like gambling.
Forex Trading for Iranians
Forex trading for Iranians comes with both opportunities and challenges. On one hand, due to currency fluctuations and economic limitations, many Iranian traders see Forex as a way to earn in US dollars. On the other hand, sanctions, banking restrictions, and the lack of domestic regulatory oversight pose risks for Iranian users.
Where is the Forex Market Located?
The Forex market has no physical location or central exchange. Unlike traditional stock markets that operate in specific buildings like the New York Stock Exchange (NYSE) or NASDAQ, Forex is a decentralized and over the counter (OTC) market. It operates through a global network of banks, brokers, financial institutions, and traders worldwide.
Forex Market Structure
The key components of the Forex market structure include:
Interbank Market
This top tier layer consists of central banks, commercial banks, and large financial institutions executing large scale Forex transactions. This sector has a direct impact on exchange rates.
Forex Brokers
Brokers act as intermediaries, providing retail traders and small businesses access to the Forex market.
Brokers are categorized into:
Market Makers (MM): These brokers set their own prices and act as the counterparty to their clients’ trades.
STP & ECN Brokers: They direct orders to the interbank market or liquidity providers.
Financial Institutions & Investment Funds
This category includes hedge funds and investment firms that trade in large volumes, significantly influencing market trends.
International Corporations & Commercial Businesses
Companies that require currency conversion for their international trade operations and are considered non speculative participants in the market.
Retail Traders
Individual traders who access the Forex market through brokers. They use trading platforms like MetaTrader (MT4/MT5) to buy and sell currencies.
Can Directly Connect to the Forex Market?
No, retail traders cannot directly access the interbank Forex market. To trade in Forex, traders must use intermediaries such as Forex brokers.
How to Access the Forex Market?
Through Forex Brokers
Brokers act as intermediaries between traders and liquidity providers.
Some brokers connect orders directly to the interbank market (ECN/STP), while others act as market makers.
Via ECN (Electronic Communication Network)
ECN brokers directly link traders’ orders to liquidity providers, offering access to real market rates.
Through Banks & Large Financial Institutions
Only large corporations and institutional traders can access the Forex market through banks and top tier brokers.
This level of access is typically reserved for high volume trades and institutional investors.
Where Are Forex Brokers’ Offices Located?
Forex brokers are not centralized in a specific location, and their offices are registered in various countries worldwide. The reason for this distribution is regulatory requirements, tax conditions, and access to global markets. Some brokers are registered in countries with strict financial regulations, while others operate in regions with more lenient regulations and lower taxes.
Cyprus: Regulated by CySEC
Many reputable European brokers, such as Exness, FXTM, and XM, are registered in Cyprus. Due to CySEC regulation and EU membership, Cyprus is one of the important activity centers for Forex brokers.
United Kingdom (UK): Regulated by FCA
London is one of the world’s largest financial centers, hosting brokers like IG and CMC Markets. The FCA is one of the most stringent financial regulators globally.
Australia: Regulated by ASIC
Brokers such as Pepperstone and IC Markets are registered in Australia. The ASIC (Australian Securities and Investments Commission) is a strong regulatory body that protects traders’ rights.
Saint Vincent & the Grenadines
Some brokers, like AMarkets, are registered in this region. The reason for choosing this country is simpler financial regulations and lower taxes.
Seychelles & Marshall Islands
Certain brokers register in these regions to avoid strict financial regulations. These countries generally have weaker regulatory oversight, so traders should exercise caution when choosing brokers registered in these locations.
United States (USA): Regulated by CFTC & NFA
Some reputable brokers, such as OANDA and Forex.com, operate in the United States. However, strict regulatory requirements have led many international brokers to avoid registering in the U.S.
What is Counterparty Risk in Forex Trading?
Counterparty risk in Forex refers to the possibility that the other party in a trade (which could be a broker or a liquidity provider) may fail to fulfill its financial obligations. This risk is more prevalent among market maker brokers or weak brokers operating without valid regulation.
Forex Market Trading Hours & Sessions
The Forex market operates 24 hours a day, five days a week since trading takes place across various financial centers worldwide.
This market is divided into four main trading sessions, each affecting liquidity and volatility differently:
Sydney Session
The first trading session, marking the beginning of the Forex trading week. Trading volume during this session is relatively low, but it impacts currency pairs involving the Australian Dollar (AUD) and New Zealand Dollar (NZD).
Trading Hours (Tehran Time): 00:30 AM – 09:30 AM
Tokyo Session
The first Asian market to open, increasing liquidity in pairs like USD/JPY and EUR/JPY. Asian traders tend to focus on economic data from Japan and China during this session.
Trading Hours (Tehran Time): 03:30 AM – 12:30 PM
London Session
The most significant and busiest Forex session, with the highest liquidity and volatility. Major European banks and institutional traders have the greatest influence in this session. Currency pairs like EUR/USD, GBP/USD, and EUR/GBP see the largest trading volumes.
Trading Hours (Tehran Time): 10:30 AM – 19:30 PM
New York Session
The second largest session, overlapping with the London session, leading to higher liquidity and causes high volatility in the market. Economic news from the U.S. has a significant impact during this period.
Trading Hours (Tehran Time): 16:30 PM – 01:30 AM