Unregulated Forex Market Advantages
Have you ever heard of unregulated Forex market? Well, this type of Forex market is common in trading and it has its own advantages that every trader should know. In general, this market provides tons of opportunities for the traders to trade with trend easily regardless of any ups and down of the market. However, it is necessary for traders to consider various factors that are resulted from regulation in order to prevent any stock market crashes.
The fact shows that the access for the traders for equal access to take both short and long positions in stock market is somewhat prevented by the stock market’s excessive regulation. So, it basically gives the first reason of why unregulated forex market can sometimes be beneficial at some point. Throughout the years, numerous rule changes have been applied following various crashes. And, the rules are basically applied to stop the market crash. At the same time, it also has made it harder to short in the markets that decline sharply. Even more, the regulation has also barred forex traders to make short sales altogether every time there is a market goes down.
Being mostly as unregulated and free market, the forces of demand and supply and the flow of orders still likely tend to dictate the moves of forex market. But sometimes in certain situations, the forex market is not fully unregulated because the central banks intervene. Usually, they intervene when they need to smooth out the undesirable and sharp exchange rate fluctuations following certain incidents that affect the country’s economic stability.
The truth is that it is likely not possible for all world’s currencies simultaneously decline in forex market. It is because the currencies are trade in pairs. This is the thing that distinguishes forex market to stock market. In the stock market, it is very likely for all the stocks to move down like in the common bear market crash scenario. In this kind of market, there is need for strict short selling rules that are applied in the stock market. The SEC is the one responsible setting those rules.
In conclusion, the unregulated system of forex market does come with several purposes. The main purpose is to allow more efficient market where every trader can equally and easily make profit from either bear markets or bull markets. Therefore, it is only normal when most traders choose to trade in forex market than stock market.