Forex is a Monopoly, controlled by a small ‘cartel’ of big banks.  That’s changing, and changing fast – as a number of non-bank FX participants are replacing the traditional ‘big 12.’  As we explain in Splitting Pennies – the fact remains, if a small group of companies controlled and manipulated the price of any other market, they’d be shut down faster than you can say “Anti-Trust.”  

A short list of things that are unique about FX:

There’s a phenomenon in FX we can call ultra high latency information arbitrage.

During Brexit, it took the GBP/USD hours to go down, in total more than 20 hours from peak to valley.  If you missed the first move down, it was easy to catch the 2nd, or the 3rd, or the 4th.  Brexit is the most bright, obvious example but not the only one – it happens nearly every week. 

In the stock market, when there’s news, not a moment goes by that the market absorbs it.  In fact, the information knee-jerk in stocks is so quick and usually so severe, traders have strategies designed to buy into the panic information leak selling.

It’s not possible to trade on information in stocks because it happens so quickly, even if you use algorithms and subscribe to Reuters ‘ultra low latency’ data service, there’s almost no opportunity there.  But in FX, it can take the markets tens of hours to absorb PUBLIC information.  No one had ‘insider’ knowledge about Brexit.  GBP/USD went down slowly, very slowly, over a period of many hours.  Spreads widened, but not to levels that would impact trading. 

But with FX, there’s good news.  You don’t need to own the FX Monopoly, to generate some Monopoly money.  But in FX, you can take your profits and spend it in your local shop (Children, don’t try to spend Monopoly money, it’s illegal).  FX – it’s like the Monopoly for adults!