How to Trade Forex with the Big Banks

The foreign exchange markets were once dominated entirely by the world mega banks. Today, however, most anyone can trade the forex markets with the big banks, working in tandem and sometimes against each other in order to make speculative money in world currencies.

Trading Forex with the Big Banks
There are two ways to trade the foreign exchange market. The first and perhaps the fastest way to trade the foreign exchange markets is to join a bank as a hired trader. Your job will be to essentially manage the money of others as a professional investor, and buy and sell currencies on behalf of the banking institution.

Commonly, those who achieve such high-level employment are recent business school graduates from the top universities. However, that doesn’t mean those paths are the only way to reach the trading desk of the banking elite. In fact, many people work their way up without any trading experience at all, first at a proprietary trading desk before moving into asset management and the “buy-side” of the institutional banking system.

Working has a proprietary trader is an excellent job, as well. At a prop trading desk, you’ll work to execute the trading strategies of the bank you represent, spot opportunities, and generate revenue. One of the best perks of this trading job is the salary. Not only do prop trading jobs provide for income starting in the six-figures, bonus checks often dwarf the annual salary. It would not at all be uncommon for a firm to have several hundred different traders each making $1 million or more after their annual bonus.

Trading Forex Individually
Trading forex with the big banks doesn’t mean you have to take off for the big financial centers any time soon. In fact, with the spread of online and internet forex trading, it is very much possible to trade with the big banks as an agent or employee, or by yourself, with your own money, in the convenience of your own home.

Because the foreign exchange market is as diverse as it is unregulated and expansive, the market itself is not actually a market. There is no Wall Street of the foreign exchange market, nor is there any centralized exchange. Instead, when you place an order on the forex market you have to trade with the big banks! That is, each movement from one currency to another is the same as moving your money from one bank to another. Where you might have previously had dollars, you now have pounds, or where you had yen, you now have Canadian dollars, etc.

Getting started requires only that you open an account with a larger bank such as Saxobank, and place your orders online, or over the phone. With a single order, several million units of currency can trade hands with up to several hundred times leverage.

Leveraging with Banks
Foreign exchange traders work with the biggest banks in the world in order to achieve levels of leverage that are consistent with the minor waves in the market. Because the foreign exchange market is relatively smooth and calm, large amounts of leverage are applied to accentuate the rises and falls within the market.

For example: If you were to trade $100 for Canadian Dollars and the CAD were to appreciate by 2%, you would earn only $2 on your $100 investment. However, with an investment of $100 and leverage of 50:1, you would earn an impressive $100 return on your $100 investment.

With that in mind, it is easy to see both the utility of the big banks in the forex market, as well as the necessity of the larger institutions for leveraging profits.

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