Vol.28 - Forex In Context

Forex In Context
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By Shunji Matsuzawa, Toyo International FX Inc. | September 29, 2005 | Comment on this Article

Over the past several years, the instruments traded in the financial services industry have become more and more accessible to the amateur day-trader through a myriad of electronic trading platforms and information available on the internet. During the same period, the demand in portfolio management has both grown and diversified, with the introduction and subsequent popularity of the hedge fund industry in East Asia.

Considering the novel availability of the traded instruments as well as the great growth in the number of portfolio managers moving money in diverse financial markets, many investors now wonder how best to cut down on service costs while maintaining their access to high-return markets. Still others, say of the middle- income bracket, question whether there is a way to tap into high-return markets without losing a great deal of time, energy and money in the process of becoming self-taught market specialists.

In the traditional equities market, both of these concerns are solved by the existence of brokerage houses; but this only solves these problems for those who wish to access a traditional, if rapidly changing, market, with merely medium growth by definition.

To yield high returns, while protecting one’s portfolio from stock market crashes and other unforeseeable, relatively regional calamities, more and more investors and traders worldwide are being drawn to the possibilities created by the truly global Foreign Exchange, or currency, market. Through leveraged trades in worldwide currencies, FOREX firms, as they are called, strive for, and often achieve, the level of return that is promised by many hedge fund managers (i.e. 20% annual), while making those same levels of return available to those who may fall outside of the “extremely wealthy” income bracket, through both a more flexible and perhaps even more diversified investment than a hedge fund. Such returns are made possible by the leverage that FOREX firms place on all open positions, as a service to investors, in order to maximize profit from market fluctuations.

Meanwhile, many electronic day-trading platforms are popping up on the internet, allowing for people of all walks of life to yield losses from a lack of the concise, simple and high-quality information that can only be disseminated in a professional, office setting through active rapport with actual human beings who are also there for the singular purpose of profiting from currency fluctuations. In other words, day-trading FOREX is even more dangerous than day-trading equities, and allowing a professional trade for you is both safer and more profitable.

FOREX traders and stockbrokers play similar roles in two different markets, but there are, of course, differences. Unlike retail brokers, a professional FOREX trader is not influenced by quotas concerning the sale of shares in a given corporate venture, but by the profitability and risk of a sell or buy order alone, based on technical and fundamental analysis. Also, FOREX traders can makes transactions on the market without your permission based on their, and the firms’, market predictions, resulting in less stress for the investor. FOREX traders, then, have responsibilities that combine those traditionally held by both fund managers and brokers, resulting in a better, more personalized service for the investor, as well as lower costs.

With the right FOREX trader, this is without doubt a highly attractive financial product. However, due to the deregulated nature of the FOREX market in Japan as well as globally, bad traders have come to handle investments in the past, prompting the Financial Services Agency of Japan to tighten regulations and heighten accountability through laws that went into force on July 1st of this summer. These regulations are, in fact, a boon for Tokyo’s FOREX firms and investors; such regulatory changes inevitably cut out many of the weaker competitors, and give greater credibility to those firms that better represent the industry, making it easy for investors to pick the right place for their money.

Shunji Matsuzawa
Business Advisor
Toyo International FX Inc.

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