The term "forex capital markets" gets bandied around a lot, often leaving more confusion in its wake than clarification. In some instances, it's a trademarked product used by some brokers to designate what they offer. In others, it refers more broadly to the entire system involved in the trade, exchange and borrowing of money or securities, facilitating the movement of capital across borders. In either case, whether you are a Malaysian trader, it’s pertinent to grasp the true meaning.
More than merely buying or selling currency pairs
When https://fxcm-markets.com/ are mentioned in the context of forex, they often refer to the 'behind the scenes' machinery of the industry – large banking institutions, hedge funds, the central banking system and major players influencing the daily trading of trillions of dollars. Everyday retail traders are in essence part of the tail of this wave; we don't move the market, we react to its behavior.
Liquidity; the essence of trading
The currency markets are inherently liquid in comparison to stocks. Whilst MYR/USD may not move with the same speed as EUR/USD, the general environment allows for trading positions to be opened and closed without being locked. Liquidity, however, can be withdrawn in the context of national holidays and during periods of light trading volumes throughout Asian trading hours, therefore, smooth trading is not guaranteed.
For Malaysian traders, accessing this system is done through third party institutions:
There is no direct link from retail traders to global financial markets through any 'terminal'; you get to participate through your broker who facilitates the connections to liquidity providers who then interact with the interbank market itself. There is a premium at each layer to be considered; the spread, commission fees or, at times, slippage. Understanding the system allows you to analyze trading costs. Such pricing is not necessarily indicative of greed but is the manifestation of the network.
A myriad of different regulartory controls in each jurisdiction:
If a firm uses the term 'capital markets' in its business name, it does not automatically mean it falls under a regulatory regime as you would assume; verify the actual license rather than rely on clever branding. A beautifully designed website can mislead, and if the regulator indicated is not independently verifiable, such a license does not mean the firm is necessarily legitimate.
The impact of rate decisions
Both the Monetary Policy Committee (MPC) and the United States Federal Reserve decisions have considerable effects on global capital flows. With interest rates generally trending upwards globally and specifically in the U.S, capital flows to the U.S and this impact is noticeable in currency pairs involving MYR as well; traders who do not attend to this information and merely focus on their charts will lose out considerably in relation to trends not governed by technical formations.
You are merely a small figure in the overall scheme of things
Don't take this as a reason not to trade. It's simply the perspective of understanding your trading account as a minor part of a large financial system; your stop-loss order is of no consequence to the overall movements on the graph, and your gut feelings do not count for much at Tuesday morning's market open. Recognizing the overall enormity of the financial structure you're participating in often makes traders far more humble, and with it, develops a more informed trading style.