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Forex Market Today: 99% Bogus Volume?

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An importer in Europe buying equipment from Japan exchanges euros to Japanese yen — this represents a forex transaction serving a merit of faciliating international trade. But sounds so old school, doesn’t it?  Today forex is probably 99.9% trading for the purpose of trading. To capture trends, to trade patterns, to use as an alternative to casino … whatever, but not to serve real trade transactions.

Accordingly, the forex market should be approached as a subject of mass psychology and algorithmic trading with little relevance to what the underlying instrument represents. By observation, the forex market has got as close to random walk as any other market in history. Will the forex market eventually transform itself, effectively, in casino which depends on constant inflow of new money and where only the house [i.e. broker] makes the money? Recently it doesn’t look a remote possibility. There are a lot of markets which are much more easier to trade [i.e. more profit with less risk] and where random walk is something far from reality.

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Written by A.S.

August 6, 2009 at 9:33 am

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