There are two levels of the Forex market where traders trade, and that’s the OCT and Interbank. Before we get there, let’s talk about Forex trading. What is Forex? Forex or currency trading is a process where a forex trader trades or buys and sells currencies following the market value exchange rate between the currencies called your base and quoted currency. The base currency is your currency and while mentioned is the one you want to trade your currency with or buy. You can do this act of currency trading in the Forex Market, so what are the forex market and its two levels? This article will discuss the two levels of the Forex Market you should know.
The Forex Market
The Foreign Exchange Market (Forex Market) is the most liquid and largest financial market on the planet. It is a market in which brokers and dealers buy and sell currencies to profit from the purchase and sale of foreign currencies. As of April 2019, the currency market generates $6.6 trillion a day, and it operates 24/7/five days a week. This means you can trade anywhere and any time in Forex. MetaTrader can automate the trades for you. You can trade every day, casually, or when you just feel like it. Historically, the Forex market was an idea for governments and corporations, but now, almost everyone can do it. You and I can trade in the forex market and earn more than our actual jobs. There are two Forex market levels, and those two are the OCT market and Interbank Market. What are the OCT Market and Interbank Market?
OCT Market and Interbank Market
When you trade Forex, there are two levels of the forex market: the OCT and Interbank market. Like the forex market itself, the OTC market doesn’t have a physical location so meaning; all trades are executed electronically. OTC stands for Over-the-Counter. This term is formed to trading currencies and describes any transaction between two parties without a formal, documented contract, meaning it’s done via a broker.
This is a double-edged sword. Since it’s not traditional and handled by a broker that you hire, it can create opportunities for you to take, but it can be riskier than having a formal exchange. What is the interbank market? The term interbank market refers to transactions and financial services available between two banks in different countries. Currency trading arises between these banks as a result of their trading activities. Due to the globalization of the financial industry, interbank markets are now also available to clients worldwide. For example, the US Department of the Treasury lists several US bank subsidiaries that are interbank subsidiaries of foreign financial institutions. Simply, the interbank prefix = “between banks.” Interbank means trades directly between the largest financial institutions like the US Treasury and other listed financial institutions globally. If OCT is not a formal exchange and everyone like you and I can take advantage of it, the Interbank is very traditional and is used by financial institutions.