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:: Volume 13, Issue 1 (Winter 2018) ::
J. Mon. Ec. 2018, 13(1): 63-80 Back to browse issues page
Is It Necessary to Restrict Forex Financial Trading? A Modified Model
Shahram Moeeni 1, Komeil Tayebi1
1- University of Isfahan
Abstract:   (1183 Views)
The Central Bank of Iran banned online currency trading through Forex brokers in November 2016. However, some Iranian speculators still trade in the online Forex market. Is this prohibition on Forex trading reasonable? According to reports, the majority of Forex day traders fail and leave the market within six months to a year. Some scholars attribute this failure to the changeable characteristics of the losing traders, including low startup capital, failure to manage risk, lack of discipline, and impatience. The purpose of this study was to explore why the majority of traders fail and to investigate the relationship between the Forex market features and the risk of failure. We developed a previous model to address this issue. Given the Forex market is a zero-sum game; the break-even point of the representative player was formulated. The model and simulation results indicated that the expected likelihood of loss is directly related to market features such as leverage, volatility, and the frequency of trading. The minimum rate of expected return, high volatile days, and spread were the other factors affecting the risk of loss. In conclusion, the study confirms the extremely high level of risk in Forex trading, which is inappropriate for the majority of individual investors. Moreover, policymakers need to consider the high risk of loss in this market, and some appropriate regulations seem reasonable on the Forex trading.
Keywords: Forex Financial Market, Market Microstructure, Game Theory, Volatility, Regulation.
Full-Text [PDF 250 kb]   (815 Downloads)    
Type of Study: Original Research - Theoric | Subject: Economics
Received: 16 Mar 2019 | Accepted: 13 Aug 2019 | Published: 23 Sep 2019
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Moeeni S, Tayebi K. Is It Necessary to Restrict Forex Financial Trading? A Modified Model. J. Mon. Ec.. 2018; 13 (1) :63-80
URL: http://jme.mbri.ac.ir/article-1-402-en.html

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Volume 13, Issue 1 (Winter 2018) Back to browse issues page
Journal of Money and Economy Journal of Money And Economy
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