EconPapers    
Economics at your fingertips  
 

Is It Necessary to Restrict Forex Financial Trading? A Modified Model

Shahram Moeeni () and Komeil Tayebi ()
Additional contact information
Shahram Moeeni : University of Isfahan
Komeil Tayebi : University of Isfahan

Journal of Money and Economy, 2018, vol. 13, issue 1, 63-80

Abstract: 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. (search for similar items in EconPapers)
JEL-codes: C60 F31 G10 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://jme.mbri.ac.ir/article-1-402-en.pdf (application/pdf)
http://jme.mbri.ac.ir/article-1-402-en.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mbr:jmonec:v:13:y:2018:i:1:p:63-80

Access Statistics for this article

More articles in Journal of Money and Economy from Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran Contact information at EDIRC.
Bibliographic data for series maintained by M. E. ().

 
Page updated 2021-09-18
Handle: RePEc:mbr:jmonec:v:13:y:2018:i:1:p:63-80