In the last years and in particular this year, the London FIX
has been on the front page of mainstream media but not for the good reasons. Trials and allegations involving various big banks is under developing right now as they are accused of artificially fixing currency rates
and rigging the FX market.
This growing scandal suggests that no matter how big is the size of the FX market
the fact that the market is controlled by a small group of traders at a handful of large banks it makes the FX market prone to manipulations.
Lack of regulation is one of the other reason why FX wrongdoing is possible and what makes FX market the most opaque market of all financial markets.
Before going any further we must address some serious questions like: What is the fix?
; Who uses the fix? How is the fix manipulated?
; and the most important question is: How can we make money of the fix?
Although there is no doubt the London Fix
has been manipulated
, by answering the above questions and knowing the mechanism behind London Fix we can create a profitable strategy from a risk to reward
stand point of view. It's like in Poker, if you have the possibility to know your opponent cards you know which cards…