A lot of forex traders, most especially the new ones are eager to know if they are going to be able to get into or out of the trade with much ease. Due to this factor, they often ask questions about the forex market depth. Since they are of the opinion that this will ultimately lead them into accessing valuable information concerning the market.
When it comes to forex trade, determining the market depth goes beyond just obtaining previous sales facts and figures, there are a lot of intangibles that must be taken into due consideration. Some of them are discussed below;
- THE FOREX BROKER
Before you can determine the forex market depth, the trader will need to be doing business with an ECN broker because this is the best way to get a true sense of what is obtainable in the market. The ECN broker usually sends all orders out into the marketplace with financial institutions and banks and other forex brokers. The ECN broker serves as a centralized location, hence the reason why the information is readily available.
While this is good, it still doenst help the smaller retail forex traders because small or mini-traders are not eligible to trade with ECN forex broker. It will also interest you to know that, it is the small traders that need the forex market depth the more.
- THE NATURE OF THE MARKET
It should be remembered that the forex market is a decentralized one. It does not have a central region where the exchange rate data could be gathered. Due to this fact, most of the retail Forex brokers don’t offer the statistics needed by the forex trader to determine the forex market depth. This doesn’t mean that the broker is holding back any information.
The Asian market has been shown to be the least active while the American market has been known to provide the most liquidity.
HOW TO DETERMINE THE FOREX MARKET DEPTH
As seen earlier, it is quite difficult to determine the forex market depth. Inasmuch as this is not readily available, it is also not impossible as there are still avenues that can be taken in replacement of this information. If the forex market depth is not available, you can also use the trading range as they both serve the same purposes. The major factor is to put into consideration, the most active currency pair.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.