OTC Market

The Forex market is the world"s largest financial market with a daily currency turnover of US$3 trillion. This is way above the combined daily volume of equity markets pegged at $30 billion.

Being an OTC market, there is no central clearing house that regulates currency trading unlike in the stocks and futures exchange. This over the counter structure eliminates fees for exchange and clearing thereby reducing transaction costs. The costs are further lowered as a result of efficiencies created by an electronic marketplace. As no middlemen and ticket costs are involved, traders deal directly with market makers.

Traders have direct access to the OTC spot Forex market 24 hours a day. This, therefore, allows investors to respond to currency fluctuations caused by economic, social and political events as they take place without having to wait for markets to open.

Unlike in a stock market where traders need to choose a trade timing and in equity markets that close each day, a Forex market gives investors a chance to maintain their jobs or businesses and spend their free time trade sitting in the comfort of their home or office. Also, if an individual failed to take part in the stock market due to commitments, he can still trade in the OTC Forex market when he has free time or even in the middle of the night. With an OTC Forex market, there"s no closing time as the market is open round the clock, 5.5 times a week.

Another feature of an over the counter market is that it allows traders and investors to trade foreign exchange using various means of communication. As it"s entirely electronic in nature, an OTC Forex market enables traders to enter and exit the market quickly. While there can be delays between order submission and execution in other markets, the OTC Forex orders occur right away.

A trader can choose to use either the internet or telephone, whichever suits him in trading currencies. With the internet - whether by cable, modem or dial up -- a trader can fix his exit points via the stop-loss order and take-profit order. In other words, if the trade is not proceeding favorably, a trader can set his platform to stop the trade and close the deal to lessen his losses. The advancement of technologies has indeed opened up opportunities for small investors to participate in currency trading. The internet, for instance, has allowed traders to buy and sell currencies even in the comfort of their homes any time of the day and night.

The Forex OTC market has a bright future. Experts foresee the market to grow more as other investors and new Forex users enter the field. A 2006 study done in the Pennsylvania State University showed that more than 85 percent of stock traders prefer the Forex market more than the other markets.