ACTUALITÉS FOREX

Indonesia is currently battling its worst wildfire season in a decade. Millions of hectares of highly flammable peat swamp have been burning for months, devastating the islands of Borneo and Sumatra, and blanketing much of South-East Asia in thick, toxic smog. Unfortunately for Indonesia, its agricultural lands are not the only part of the country in flames. The Indonesian stock market was set ablaze late last week after MSCI – formerly Morgan Stanley Capital International – announced that it would launch a consultation to downgrade Indonesia’s market classification from ‘emerging’ to ‘standalone’. The announcement triggered a 15% selloff in the IDX Composite last week, marking the worst weekly downturn for the index since the 1998 Asian financial crisis. MSCI routinely revises the status of different countries, reflecting their changing economic and financial conditions, but as a rule, downgrades are uncommon. What makes the Indonesia downgrade even more surprising is that MSCI will potentially demote the country by two full ranks instead of one. The MSCI classification is not a reflection of the size or strength of a given country, but rather an indication of how easy it is for foreign capital to invest in its domestic market. The classification has four separate ranks: Developed markets: highly developed economies, at least five companies with large market caps and trading volumes, unrestricted foreign access and fully convertible currencies. E.g.: United States, United Kingdom, Japan, etc. Emerging markets: three large companies required, decent accessibility to foreign investors but with notable exceptions. E.g.: Brazil, Greece, China, etc. Frontier markets: only one large company necessary, at least partial capability of moving capital in and out of the country. E.g.: Iceland, Vietnam, Kenya, etc. Standalone markets: isolated, difficult to invest, typically plagued by strict capital controls. Indonesia’s downgrade, if implemented, would relegate the country to the absolute lowest ranking within the system. The IDX Composite has been in a prolonged drawdown since the start of the year. The index successfully breached 9,000 points back in January, but saw lows of just 4,900 points this week as a result of the proposed downgrade. It was in fact a similar announcement that triggered the initial selloff earlier in the year, when MSCI issued a warning to clients regarding the integrity of the Indonesian stock exchange. Opaque corporate ownership structures, price manipulation and insider trading were all cited as reasons for concern, prompting billions of dollars in foreign capital to withdraw and reduce their exposure to the apparent structural risk. The subsequent oil crisis did even more damage during the spring months, erasing the country’s trade surplus and draining Indonesia’s dollar reserves, tanking the local currency in the process. Aggressive spending policies by the current administration have also set alarms bells ringing, lifting the debt service ratio to a staggering 36%, meaning over a third of Indonesia’s foreign revenue goes straight to repaying external debt obligations. A double demotion in the MSCI ranks is an extremely rare event, occurring only five times in the last 25 years. Russia suffered the same fate back in 2022 following harsh international sanctions and retaliatory capital controls. Argentina was also demoted to standalone status after the government imposed strict capital controls in 2021. Venezuela, Pakistan and Sri Lanka were also thrown to the back of the bus at various points, for much of the same reasons. In all cases, the MSCI’s own rulebook forced the company into performing the downgrades, due to the complete freeze on foreign capital entering or exiting the markets in question. Indonesia’s situation is different. The Indonesian government is not implementing capital controls, nor is the country subject to international sanctions, nor are price floors being enforced. The problem is simply that the entire stock market is a financial hall of mirrors because no one knows the fair value of any of the companies listed within it. Massive conglomerates claim to have large public floats on paper, but in reality, most of the shares are held by founders, shell companies and hidden affiliates. In such low-liquidity conditions, wash trading become very easy. A small number of market participants were able to manipulate prices to entirely fictional levels, tricking foreign funds into buying ridiculously inflated assets. To make matters worse, local regulatory bodies turned a blind eye to all of the above, eventually causing analysts at MSCI to collectively throw up their hands in frustration. Once foreign institutional money realised that it had been duped, everyone ran for the exit, hence the 15% collapse observed last week. MSCI will not perform the actual downgrade until mid-2027. The Indonesian government has until then to provide concrete proof that is has successfully eradicated the opaque ownership structures and wash trading practices. Should it fail to do so, the demotion will likely proceed as announced. In the meantime, Indonesian stocks will essentially be quarantined from global markets until a decision has been reached. About the Author Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS. Reviewed by RADEX MARKETS Risk Warning: Trading derivatives and leveraged products carries a high level of risk, including the risk of losing substantially more than your initial investment.

The forex market is open 24 hours a day from Monday to Friday, but it is not equally active throughout. For much of the day trading is thin, spreads are wider and prices move very little. If you have ever opened a trade late in the evening and watched it go nowhere while the spread ate into your stop, the time of day was probably part of the reason. This guide sets out the most active hours in UK time, what a quiet hour costs in pips, the busiest window for each major pair, a worked example of one trade taken at two different hours, and the times when it is better to stay out. The best time to trade currency pairs is the overlap between the London and New York sessions, from 13:00 to 17:00 UK time. The overlap starts at 13:00. Have your platform ready before it does. Forex market sessions are the four blocks of the trading day, named after Sydney, Tokyo, London and New York, and each one is active during its own city's business hours. All times in this guide are UK local time on the 24-hour clock: GMT in winter and BST, one hour ahead of GMT, in summer. The table shows when each session runs and which currencies are most active in it. For a few weeks each spring and autumn, the UK and the US change their clocks on different dates, so some of these times shift by an hour. Sydney is the smallest of the four sessions, and it is where the trading week begins. Banks in Australia and New Zealand are the main participants, so AUD and NZD pairs see most of the activity, and weekend news is priced in here first. For a UK trader it runs through the late evening and overnight. Tokyo is the centre of yen trading, with Japanese banks and exporters and the wider Asian market setting the tone. JPY, AUD and NZD pairs are the most active, while EUR and GBP pairs tend to stay in narrow ranges because European markets are closed. In UK time it runs from around midnight to the early morning. London is the largest forex centre in the world. The UK handled about 38% of global turnover in April 2025, in a market trading $9.6 trillion a day, according to the Bank for International Settlements Triennial Survey published in September 2025. With that much volume passing through, spreads on major pairs are usually at their tightest and the day's trends often start here. For a UK trader it is simply the working day, 08:00 to 17:00. New York is the main session for the US dollar, driven by US banks, funds and companies. Its first four hours are the busiest because London is still open and most US data is released at 13:30. After London closes at 17:00, activity fades steadily into the evening. Liquidity is a measure of how easily an asset can be bought or sold without significantly affecting its price. In forex, high liquidity shows up as tight spreads and orders that fill at the price you asked for. Read more: What is liquidity in Forex and how is it measured The best time to trade forex is when two sessions overlap. Two sets of banks and traders are active at once, which usually means tighter spreads and larger moves. There are three such windows, and they are the best times to trade forex: Here is how the three compare. Europe and North America trade together for these four hours, so EUR/USD, GBP/USD and USD/JPY see their largest moves of the day. Most US data is released at 13:30, near the start of the window, which is why trends and breakouts are most common here. It suits day traders and news traders, provided the stop-loss allows for faster swings. Asian traders hand over to Europe around the London open at 08:00. Yen crosses such as GBP/JPY and EUR/JPY often break out of their overnight range in this hour as London volume arrives. It suits traders who look for a break of the Asian range before the working day starts. These are the busiest hours for AUD, NZD and JPY pairs, and they fall overnight in the UK. AUD/USD, AUD/JPY and NZD/USD do move, though usually modestly, while European pairs are largely flat. The window suits range traders and those who trade late at night more than anyone looking for a trend. Volatility is the degree to which a price fluctuates over a given period. High volatility means more opportunity and more risk in the same hour. The same trade costs more in a quiet hour, because the spread widens when fewer banks and brokers are quoting prices. Take an illustrative example: 0.10 lots of EUR/USD, worth $1 per pip, with a 20 pip stop-loss. Opened at 14:00 during the overlap, the spread might be 0.8 pips; opened at 22:05, just after the New York close, it might be 3 pips. These spreads are examples, and yours will depend on your broker and account type. At 14:00: 0.8 pips × $1 = $0.80 per trade; 0.8 ÷ 20 = 4% of the stop; $0.80 × 40 trades = $32 a month At 22:05: 3 pips × $1 = $3.00 per trade; 3 ÷ 20 = 15% of the stop; $3.00 × 40 trades = $120 a month Side by side, the gap is easier to see. The difference is $88 a month on the same 40 trades, before any of them has won or lost. If evenings are the only time you can trade, keep to the 17:00 to 20:00 window, where USD pairs are still liquid, and stop before the spread widens around 22:00. Read more: What Is Spread in Forex? Formula, Calculation & Examples The spread is the difference between the bid (sell) price and the ask (buy) price of a currency pair. It is measured in pips, and the narrower it is, the less each trade costs. A pip is the smallest standard price move in a currency pair, usually the fourth decimal place (0.0001). For pairs that include the yen it is the second decimal place (0.01). Read more: What is a pip in forex trading? How to calculate and use it The best time to trade currency pairs depends on the pair: each one is most active when the financial centres of both its currencies are open and when their economic data is released. Six pairs account for most of what UK retail traders deal in: The table shows the most active window for each one, in UK time. Read more: What is a currency pair? Definition, types and examples for beginners The best time to trade GBP/JPY from the UK is the London open from 08:00, when Tokyo is closing and London liquidity arrives. A second active period follows during the London and New York overlap. The pair moves more than most majors because it joins two currencies that react to different things: the pound to UK data and Bank of England decisions, the yen to Bank of Japan policy and to shifts in risk appetite. Its spread is wider and its swings are larger than those of GBP/USD, so it makes sense to trade it with a smaller position size. The best time to trade AUD/USD is during the Sydney and Tokyo overlap, when Australian data is released. The monthly labour force figures from the Australian Bureau of Statistics come out at 11:30 in Canberra, which is 00:30 UK time for most of the winter and 02:30 for most of the summer, so the pair's home hours fall in the middle of the night for a UK trader. The practical alternative is 13:30 UK time, when US data moves the dollar side of the pair while you are awake. For a trader based in the UK, the best time to trade forex is 13:00 to 17:00, with 08:00 to 10:00 as the second choice. UK traders are well placed because both windows fall inside the working day, and the main UK and US releases come out in or just before them. The scheduled releases below are what shape those windows from day to day. The dates for each release are published by the Office for National Statistics, the Bank of England, the European Central Bank, the US Bureau of Labor Statistics and the Federal Reserve. US releases arrive an hour earlier in UK time during the few weeks when the two countries' clocks are out of step. Read more: Popular Trading Hours: What Time Does the Forex Market Open in the UK? If you are fitting trading around a job, the best times to trade forex in the UK come down to three slots: If you have not placed a trade yet, our guide on how to start trading forex covers the first steps. Beginners usually find the London morning, from 08:00 to 12:00, the easiest window to learn in, because liquidity is good while the moves are less abrupt than in the overlap. Three habits help you get the most from it: Read more: How to start trading forex: a step-by-step guide for beginners The same trade idea can end differently depending on the hour it is taken. The example below uses illustrative prices, and neither outcome is a prediction. GBP/USD has ranged between 1.3020 and 1.3050 through the morning. The plan is to buy a break above the range at 1.3055, with a stop-loss at 1.3030 and a take-profit at 1.3105, trading 0.20 lots worth $2 per pip. Risk: 1.3055 − 1.3030 = 25 pips × $2 = $50 Reward: 1.3105 − 1.3055 = 50 pips × $2 = $100 Risk-to-reward ratio: $50 : $100 = 1:2 In scenario one, the entry triggers at 14:10 UK time, during the overlap, with a 1 pip spread that costs 1 × $2 = $2. US traders are arriving, volume follows the break and the price runs to 1.3105. The trade closes at the take-profit for a gain of $100. In scenario two, the same entry triggers at 21:30 UK time with a 3 pip spread that costs 3 × $2 = $6. London closed hours ago, few traders join the move, and the price stalls just above the range before drifting back to 1.3030. The trade closes at the stop-loss for a loss of $50. The spread also changes how much room the trade has. With a 1 pip spread the sell price sits at 1.3054 when you buy, 24 pips above the stop; with a 3 pip spread it sits at 1.3052, only 22 pips above it. The difference between the two outcomes is participation: a breakout needs other traders to follow it, and by 21:30 most of them have finished for the day. Slippage is the difference between the price you request and the price at which your order is actually filled. It is most common in thin markets and around news releases, and it can work for or against you. The clock alone does not decide the best hour. Four factors change how a session behaves from one day to the next. Prices move sharply around major releases because traders reprice a currency within seconds when a figure differs from the forecast. A US jobs number well away from expectations can move EUR/USD by tens of pips in a few minutes. Just before a release, liquidity providers pull back and spreads widen, so entering ahead of the number costs more and risks a worse fill. Unscheduled events such as elections or geopolitical shocks have the same effect without the warning. Read more: What Is Market Sentiment? Definition, Indicators and Strategies Liquidity is how easily a pair can be bought or sold without moving its price, and volatility is how far the price travels in a given period. During overlaps the two rise together: plenty of orders and plenty of movement, the combination most strategies need. In quiet hours they come apart, with liquidity low and prices either flat or jumping on small orders. Read more: Forex Volatility: Measuring and Trading Currency Pair Swings The day matters as well as the hour, as this breakdown shows. The first Friday of the month is the usual date for US Non-Farm Payrolls, which makes that afternoon one of the most active of the month. The Bank of England, the European Central Bank, the Federal Reserve and the Bank of Japan each set interest rates on a published schedule. Volatility rises before a decision as traders position for it, peaks when it is announced, and often continues through the press conference as the wording is digested. A decision that matches expectations can still move the market if the tone of the statement changes. Knowing when to stay out matters as much as knowing when to trade. The five situations below are the ones to watch for: Rollover is the point at which an open position is carried from one trading day to the next, around 22:00 UK time. A swap charge or credit is applied to positions held through it. These five steps turn the hours above into a routine. Pick one window that fits your working day and trade only that window for a month. For most UK traders that means the overlap from 13:00 to 17:00 or the London open. Check an economic calendar each morning and mark the releases that fall inside your window. Decide in advance whether you will trade through them or step aside. Match the method to the hour. Trend and breakout approaches fit the overlaps, while range approaches fit quiet sessions. Size each position to the volatility of the session, with a smaller size when the moves are faster. Risk no more than 1 to 2% of the account on any trade. Read more: 10 Forex risk management tips every trader should know Record the entry time of every trade. After 20 trades, review the results by hour and drop the hours that lose. Trading outside the most active hours changes the result of a trade even when the idea behind it is sound. Fewer participants are quoting prices in quiet hours, so the spread widens. Each trade starts further from break-even. In the comparison above, the same EUR/USD trade cost 0.8 pips in the overlap and 3 pips after 22:00. With fewer orders in the market, a stop-loss or a market order can be filled at a worse price than the one requested. The difference grows with position size, because a larger order needs more of the liquidity that is available. A move needs participation to continue. A break of a range in a quiet session can stall and reverse, as the 21:30 scenario in the worked example shows. Pairs whose home markets are closed move only a few pips an hour. The target becomes harder to reach while the cost of the trade stays the same or rises. Trades held through the rollover around 22:00 UK time or over the weekend can reopen at a different price. A stop-loss cannot fully control that risk, because it is filled at the first price available after the gap. The best time to trade forex in the UK is 13:00 to 17:00 UK time, when London and New York are both open. The second most active window is 08:00 to 10:00, around the London open. Beginners usually do best in the London morning, from 08:00 to 12:00 UK time. Liquidity is good and the moves are less abrupt than in the overlap. No hour is profitable in itself. The London and New York overlap has the most movement and the tightest spreads, which raises both opportunity and risk. Tuesday to Thursday usually bring the most consistent activity. Monday starts slowly, and Friday afternoon thins out as traders close positions before the weekend. It depends on the pair. After 22:00 UK time only the Asia-Pacific sessions are open, so the night suits yen and Australian dollar pairs and range approaches, while spreads on European pairs are wider. August and late December are usually the hardest. Holiday periods reduce liquidity and make price action choppy. This guide covered the four sessions, the three overlaps, what a quiet hour costs, the most active window for each pair, the UK schedule, one trade taken at two different hours, the times to avoid and what happens outside the best hours. The time of day is part of the trade, just as the entry and the stop are. As a next step, choose one window, work out your spread cost per trade at that hour, keep the release times to hand and note the times you will not trade. Trading fewer hours in better conditions is usually more effective than trading more hours in poor ones. The RADEX MARKETS editorial team consists of seasoned financial professionals and market observers. Dedicated to delivering objective market summaries, macroeconomic insights, and educational content, the team strives to keep traders well-informed in a fast-paced financial environment. Reviewed by RADEX MARKETS Risk Warning Trading derivatives and leveraged products carries a high level of risk, including the risk of losing substantially more than your initial investment.

You click Buy on EUR/USD and, almost instantly, your trade is filled at the price shown on your screen. It feels effortless, but have you ever stopped to wonder who was actually willing to sell those euros to you at that exact moment? The answer is usually a forex liquidity provider. A forex liquidity provider (LP) is a financial institution that continuously buys and sells currencies, making sure there is always enough supply and demand for trades to be executed quickly. Without liquidity providers working quietly behind the scenes, forex trading would be slower, more expensive, and far less reliable. In this guide, I'll explain what a liquidity provider is, what it does, how it differs from a broker and a market maker, the different types of liquidity providers, how brokers work with them, and why they have such a big influence on the spreads and execution you experience every day as a trader. A forex liquidity provider (LP) is a large financial institution, typically a major bank or specialist trading firm, that continuously buys and sells currencies, providing the prices and trading volume needed to keep the forex market moving. Your broker connects to one or more liquidity providers, and the greater the available liquidity, the tighter the spreads and the faster your trades are usually executed. Ready to trade with deep liquidity and competitive execution? A forex liquidity provider is a financial institution or specialist trading firm that continuously stands ready to buy and sell currencies, ensuring trades can be executed without unnecessary delays. In simple terms, a liquidity provider keeps the market moving by making sure there's almost always someone on the other side of your trade. Rather than waiting for another retail trader to take the opposite position, your broker accesses prices supplied by one or more liquidity providers. This allows orders to be filled within milliseconds under normal market conditions, helping to create the smooth trading experience most of us take for granted. Liquidity providers primarily earn money from the spread, the small difference between the bid price (the price buyers are willing to pay) and the ask price (the price sellers are willing to accept). While each individual spread may be tiny, processing an enormous number of trades every day makes this business highly profitable. The forex market handles trillions of dollars' worth of currency transactions every day (BIS Triennial Central Bank Survey), making it the largest financial market in the world. That incredible level of activity only works because liquidity providers are constantly quoting prices, buying from one participant while selling to another. Without them, spreads would widen dramatically, execution would slow down, and price swings would become far more severe. Read more: What is liquidity in Forex and how is it measured Forex liquidity begins at the very top of the financial system: the interbank market. This is where the world's largest banks continuously trade currencies with one another, creating the deepest pool of liquidity available. These Tier-1 institutions constantly quote buy and sell prices across the major currency pairs, forming the foundation of the global forex market. That liquidity is then distributed down through the trading ecosystem: Tier-1 Banks → Liquidity Providers → Brokers → Retail Traders By the time you click Buy or Sell on your trading platform, your broker has already tapped into this wider liquidity network to find a competitive price and execute your trade. This is why, although you'll probably never interact with a liquidity provider directly, its pricing and available volume influence every trade you place. The stronger the liquidity behind your broker, the more efficient your overall trading experience is likely to be. Read more: What Is a Forex Currency Pair and How It Works in Forex A forex liquidity provider supplies the prices and trading volume that allow your orders to be executed almost instantly. Every time you place a trade, a chain of events happens behind the scenes that most traders never see. Here's how it works: For example, if you place a buy order on EUR/USD, your broker looks for the best available ask price from its connected liquidity providers. One of those providers sells the currency to you, allowing your trade to be completed almost immediately. Although the process sounds complex, it happens so quickly that you simply see your order change from Pending to Open in the blink of an eye. Read more: Types of Forex Orders: Master the 7 Types Like a Pro A liquidity provider performs several important functions that help keep the forex market running efficiently. Read more: What is slippage and how to avoid it in trading You'll probably never speak to a liquidity provider or even know which institutions are pricing your trades. However, the quality of your broker's liquidity network quietly influences almost every aspect of your trading experience, from the spreads you pay to the speed at which your orders are filled and how closely your execution matches the price you expected. In other words, the better the liquidity sitting behind your broker, the smoother your trading is likely to feel, even if you never see what's happening behind the scenes. These three terms are often used interchangeably, but they describe different roles within the forex trading ecosystem. Understanding the difference makes it much easier to see what happens after you click Buy or Sell. A liquidity provider (LP) is the broad term for a bank or financial firm that supplies prices and trading volume to the market. It continuously quotes both buying and selling prices, making it possible for trades to be executed quickly. Think of the liquidity provider as the source of the market's available currency inventory. A forex broker is the intermediary between you and the wider market. Rather than creating liquidity itself, a broker provides you with a trading platform and access to one or more liquidity providers that can execute your orders. In simple terms, the broker is the bridge that connects retail traders to institutional liquidity. Read more: About RADEX MARKETS A market maker is a firm that continuously quotes both buy and sell prices while standing ready to take the opposite side of your trade. Some brokers operate as market makers, while many independent firms also perform this role. Because market makers actively provide prices and liquidity, they are considered one type of liquidity provider. Market makers are liquidity providers, but not every liquidity provider is a market maker. Some LPs simply supply liquidity to brokers and institutions without directly dealing with retail traders. It's also worth remembering that the lines aren't always completely separate. A large financial institution can wear more than one hat. For example, a company might provide liquidity to brokers, operate as a market maker in certain markets, and offer brokerage services to institutional clients, all at the same time. For retail traders, however, the distinction is straightforward: your broker gives you access to the market, while liquidity providers supply the prices that make your trades possible. Understanding that relationship helps explain why two brokers can offer noticeably different spreads and execution speeds, even when you're trading the same currency pair. In the forex market, liquidity flows from the top down. A relatively small number of major financial institutions create the deepest pool of liquidity, which is then distributed through various intermediaries before reaching retail traders. Understanding the different types of liquidity providers helps explain how your broker is able to offer competitive prices and fast execution. The main types of forex liquidity providers are: Let's look at each one in a little more detail. Tier-1 banks are the world's largest global banks that trade directly with one another in the interbank market. Institutions such as JPMorgan, Citi, Barclays, and Deutsche Bank continuously quote buy and sell prices across major currency pairs, creating the deepest and most reliable source of forex liquidity. These banks sit at the very top of the liquidity chain. Their enormous trading volumes allow them to offer some of the tightest pricing available, making them the foundation upon which much of the global forex market operates. Non-bank liquidity providers are specialist trading firms, hedge funds and High-Frequency Trading (HFT) companies that also supply liquidity to the market. Instead of relying on traditional banking operations, they use sophisticated algorithms and ultra-fast technology to continuously quote prices and execute trades. Many of these firms specialise in providing liquidity for specific currency pairs or trading sessions. By competing alongside the major banks, they increase overall market depth and often help keep spreads competitive, particularly during active trading hours. A prime broker acts as a gateway between the largest liquidity providers and institutional clients such as hedge funds, asset managers and larger forex brokers. Rather than relying on a single bank, prime brokers aggregate pricing from several Tier-1 banks into one combined liquidity pool. Their clients can then access multiple sources of liquidity through a single relationship, improving execution quality and reducing the need to connect to numerous banks individually. In simple terms, a prime broker brings together several streams of institutional liquidity into one convenient access point. A Prime-of-Prime (PoP) provider extends institutional liquidity to smaller brokers that cannot qualify for a direct relationship with a prime broker or Tier-1 bank. Direct access to the interbank market usually requires significant trading volumes, capital and regulatory requirements that many smaller brokers simply cannot meet. Prime-of-Prime firms bridge that gap by sourcing liquidity from prime brokers and making it available to smaller market participants. This lower barrier to entry allows many retail forex brokers to offer institutional-quality pricing and execution without needing their own direct banking relationships. An Electronic Communication Network (ECN) is a technology-driven marketplace that automatically matches buy and sell orders from multiple participants. Rather than relying on a single institution to provide prices, an ECN combines orders from banks, brokers, liquidity providers and other traders into one electronic marketplace. Because prices are matched transparently and anonymously, ECNs often provide highly competitive spreads, particularly during periods of strong market activity. In many respects, an ECN becomes a liquidity source in its own right by electronically matching buyers and sellers in real time. For traders using ECN-style accounts, this often means direct access to deeper pools of liquidity with pricing sourced from multiple institutions simultaneously. Although each type performs a slightly different role, they all contribute to the same objective: ensuring there is enough liquidity available for trades to be executed efficiently. By the time your order reaches the market, it may have passed through several of these layers, but all of them are working together to deliver the fast execution and competitive pricing that traders expect today. A forex broker and a liquidity provider work as partners behind the scenes to ensure your trades are executed quickly and at competitive prices. While traders often focus on the broker they can see, it's the liquidity providers in the background that make those prices possible. Most brokers don't create liquidity themselves, they source it from one or more liquidity providers. Every time you place an order, your broker searches its network of LPs to find the best available price before routing your trade for execution. The process happens in fractions of a second and usually looks like this: This competitive process helps brokers deliver tighter spreads and better execution than if they relied on a single source of liquidity. Although the trade feels like a single transaction from your perspective, both the broker and the liquidity provider perform different roles and earn their income in different ways. This arrangement allows each party to focus on what it does best: the liquidity provider supplies market access and pricing, while the broker provides the trading platform, customer support and order routing. Not all broker liquidity networks are built the same. Many established brokers connect to multiple liquidity providers rather than relying on just one. Their trading systems aggregate quotes from several institutions simultaneously, selecting the most competitive price available at that moment. For retail traders, this generally leads to: Of course, no broker can completely eliminate wider spreads or slippage during major economic announcements or periods of extreme volatility. However, a broader and deeper liquidity network usually provides greater resilience when markets become more challenging. It's also helpful to understand where different broker models fit into the picture. Neither model is automatically "better" than the other. What matters most is the broker's overall execution quality, transparency and regulatory standards. Understanding how your broker handles orders simply helps you make a more informed choice when comparing trading platforms. Example: You place a 0.1-lot EUR/USD buy order on your trading platform. Your broker instantly polls the liquidity providers connected to its network and identifies the lowest available ask price. One liquidity provider fills the opposite side of your trade, and your order is executed in milliseconds. You pay the spread, the broker earns a small commission or mark-up (depending on your account), and the liquidity provider earns the spread. The entire process is completed before you can even blink. For most traders, this entire chain remains invisible. Yet it's one of the most important systems operating behind every trade you place, quietly ensuring that clicking Buy or Sell results in fast, reliable execution. You'll probably never log into a liquidity provider's platform or even know which institutions are pricing your trades. However, they influence the things you notice every time you trade. From the spread you pay to the speed of your execution; the quality of your broker's liquidity network has a direct impact on your overall trading experience. In other words, while liquidity providers operate behind the scenes, their performance is reflected in almost every trade you place. Deep liquidity means more institutions are competing to quote the best prices. As competition increases, the difference between the bid and ask prices, known as the spread, typically becomes smaller. For me, this is one of the biggest advantages of good liquidity. Even a fraction of a pip saved on every trade can add up over weeks or months, especially if you're an active trader or scalp the markets regularly. Read more: What Is the Spread in Forex? Learn to Calculate and Trade It A strong liquidity network means there's usually a willing buyer or seller available the moment you place your trade. Instead of your order waiting to be matched, your broker can route it to a liquidity provider that already has a price available. Under normal market conditions, this allows trades to be executed in milliseconds, helping you enter and exit positions at the price you intended. This becomes particularly valuable in fast-moving markets, where every fraction of a second can make a difference. Slippage is the difference between the price you expect to receive and the price at which your trade is actually executed. No liquidity provider can eliminate slippage entirely, particularly during major news releases or sudden market shocks, but deeper liquidity helps absorb larger orders without causing significant price movement. As a result, you're generally more likely to receive a price that's close to the one you clicked on, particularly during normal trading conditions. Markets don't always move calmly. Interest rate decisions, inflation reports and unexpected geopolitical events can all trigger sharp price movements. During these periods, high-quality liquidity providers continue quoting prices wherever possible, helping the market function even when volatility increases. Spreads may still widen temporarily, but deeper liquidity generally reduces the likelihood of severe price gaps compared with markets where liquidity is thin. For retail traders, that can mean a more consistent trading experience during the moments when execution matters most. Read more: What is forex volatility? Definition, causes, strategies Almost every broker advertises tight spreads and fast execution. Those promises don't appear by magic; they're largely a reflection of the liquidity sitting behind the broker. A broker with access to multiple high-quality liquidity providers is generally in a stronger position to offer competitive pricing, efficient execution and better overall trading conditions. While you'll never interact with those institutions directly, you'll experience the results every time you place a trade. Once you understand what's happening behind the scenes, those marketing claims become much easier to evaluate. They're really telling you about the strength of the broker's liquidity network, not just the trading platform itself. Retail traders don't choose a liquidity provider directly; that's a decision made by the broker. Behind the scenes, brokers carefully evaluate potential liquidity providers to ensure they can offer competitive pricing, reliable execution and a smooth trading experience for their clients. Here are some of the key factors brokers consider. One of the first things brokers assess is execution quality. A good liquidity provider should be able to process orders with minimal latency, high fill rates and consistent performance, even during busy market conditions. Fast execution helps reduce delays between placing an order and having it filled, giving traders a better chance of receiving the price they expected. Not all liquidity pools are equally deep. Brokers typically favour providers that can supply substantial trading volume while maintaining competitive bid and ask prices. Deeper liquidity generally allows larger orders to be executed with less market impact and helps keep spreads tighter during normal trading conditions. For retail traders, this often translates into lower trading costs and more consistent execution. A liquidity provider also needs to integrate seamlessly with the broker's trading infrastructure. Many institutional connections use a FIX API (Financial Information eXchange Application Programming Interface), the industry-standard protocol for transmitting market data and trade orders between financial institutions. Think of it as the high-speed communication link that allows a broker's trading platform to exchange prices and orders with its liquidity providers efficiently. Reliable technology helps ensure quotes are delivered quickly and trades are executed accurately. Trust is another important consideration. Brokers generally prefer liquidity providers with strong financial backing, proven operational stability and appropriate regulatory oversight. A reliable provider is more likely to continue delivering consistent pricing and execution during periods of heightened market volatility. This doesn't eliminate market risk, but it helps reduce operational risk behind the scenes. Many brokers now offer more than just forex. They may also provide access to CFDs on indices, commodities, precious metals, shares and cryptocurrencies. Choosing a liquidity provider that supports multiple asset classes allows brokers to source pricing from fewer providers while offering clients a broader range of markets through a single platform. Read more: How to choose the best forex broker in 2026 As a retail trader, you'll rarely know which liquidity providers your broker uses, and in most cases, you don't need to. What matters is the outcome. If your broker has built strong relationships with high-quality liquidity providers, you're more likely to benefit from tighter spreads, faster execution and more consistent pricing. It's one of the many behind-the-scenes decisions that quietly shapes your trading experience, even though you'll never interact with the liquidity providers themselves. A liquidity provider is a financial institution or specialist trading firm that keeps markets running efficiently by ensuring assets, including currencies, are always available to buy and sell. By continuously quoting both buying and selling prices, liquidity providers help traders execute orders quickly and at competitive prices. Forex liquidity providers are typically major global banks, specialist trading firms and market makers that stand ready to buy and sell currencies at any moment. Together, they provide the liquidity that keeps the multi-trillion-dollar-a-day foreign exchange market operating smoothly. A liquidity provider supplies the pricing and trading volume needed for currency trades to be executed efficiently. By continuously providing buy and sell quotes, liquidity providers help ensure traders receive fast execution, competitive spreads and reliable access to the market. No. A broker provides traders with access to the forex market and executes their orders, while a liquidity provider supplies the prices and liquidity behind those trades. Some brokers operate as market makers, making them one type of liquidity provider, but the two roles are not the same. Sometimes. A market maker is one type of liquidity provider because it continuously quotes both buy and sell prices and stands ready to take the opposite side of trades. However, not every liquidity provider operates as a market maker, as many simply supply liquidity to brokers and institutions. Choosing a liquidity provider is primarily an institutional decision made by brokers, banks and investment firms. They typically evaluate providers based on execution quality, the depth of available liquidity, pricing competitiveness, technology integration, regulatory standing and overall reliability to ensure clients receive the best possible trading conditions. Every time you place a forex trade, there's an entire network working behind the scenes to make that execution possible. At the heart of that network is the liquidity provider, the bank or specialist trading firm supplying the prices and trading volume that allow orders to be filled quickly and efficiently. Although you'll never deal directly with a liquidity provider, its influence is reflected in the spreads you pay, the speed of your execution and how smoothly your trades are handled when markets become volatile. The stronger the liquidity behind your broker, the better your overall trading experience is likely to be. After more than 15 years of trading, I've learned that phrases like "tight spreads" and "fast execution" aren't just marketing buzzwords. Once you understand who's really standing behind the quote on your screen, those claims start to mean something, and you'll have a much better idea of what to look for when choosing your next broker. Lee W. is a seasoned professional trader with over 10 years of experience. Passionate about sharing valuable expertise and unique market insights, Lee W. now serves as an external and independent market analyst for RADEX MARKETS. Reviewed by RADEX MARKETS Risk Warning: Trading derivatives and leveraged products carries a high level of risk, including the risk of losing substantially more than your initial investment. Deeper into liquidity: Related concepts:

The semiconductor fear trade finally spilled over into US markets in earnest last Friday, triggering a 4% drop in the SOX semiconductor index (SOX) and saddling the Nasdaq-100 (NDX) with a 2.5% daily loss. The memory sector bore the brunt of the selloff, as Micron (MU) shed 5.6%, Western Digital (WDC) and SanDisk (SNDK) both fell 6.9%, while Seagate (STX) fared worst of all with a 7.5% decline. Advanced Micro Devices (AMD) also felt the pain, losing 5.9% by the end of the session, and even Nvidia (NVDA) incurred a minor 1.4% slump. Despite the relative size of the tech sector in US equities, the S&P 500 (SPX) escaped with only a 1% loss on Friday, while the Dow (DJI) took a mere 0.3% hit. The Korean stock market is still reeling from the semiconductor selloff, although the Kospi index (KOSPI) managed to stabilise on Friday and appears to be digging its feet in once again this morning. With that said, SK Hynix (000660) opened 4% lower earlier today and showed very little strength going into today’s session. Over in Japan, the Nikkei 225 (NI225) has so far managed to hold on to 64,000 points, but remains in a similarly precarious position.Meanwhile, for entirely unrelated reasons, the Indonesian stock market is currently undergoing a full-on meltdown, plunging over 10% on Friday and falling another 5% as of this morning. The recent drawdown cements the Indonesian stock market as one of the worst performers of the year, while the local currency is in the midst of collapsing to historic lows of 18,000 per USD. The major trigger for the selloff was the double downgrade from MSCI (MSCI), which demoted Indonesia from ‘emerging’ to ‘standalone’ market, which is essentially Morgan Stanley’s bottom of the barrel classification. Financial and legal jargon aside, the reasoning behind the decision is that the Indonesian state is simply too corrupt to take any of the published figures seriously. Crude oil prices are certainly not helping. The Brent Crude (BRENT) benchmark tapped $110 per barrel on Friday as escalation fears gripped oil markets. Unusual military movements in Iran prompted rumours of pre-emptive strikes against its neighbours, while Ukrainian attacks against Russian refineries continue unabated. Thousands of drones hit Saint Petersburg facilities late last night, setting ablaze a major oil terminal. Crude oil prices fell somewhat earlier today however after President Trump waived sanctions on Russian oil, potentially easing the strain on global petroleum deliveries. Higher oil prices are translating to higher inflation rates around the world, and this week the UK and Japan will show the extent of such pressures. On Wednesday, the latest batch of UK inflation data is expected to show a rise to 3.4% year-over-year, from 3.1% over the prior reading. Japanese figures are likewise forecast to show an upswing to 2.3% on Friday. UK and Canadian retail sales may make a minor dent on Friday, but overall the economic calendar is relatively quiet this week. The earnings schedule is a different story. On Tuesday, SpaceX (SPCX), GE Aerospace (GE) and Netflix (NFLX) will all report their third quarter earnings; Wednesday brings Magnificent Seven members Meta Platforms (META) and Tesla (TSLA) to the table; Thursday will see Procter & Gamble (PG) and Lockheed Martin (LMT) deliver their latest financial reports, before Friday gives way to American Express (AXP) to close out the week. #SOX #INDONESIA #EARNINGS

A currency pair drops sharply, pauses and begins to edge higher. It can look like the sellers have finished and a recovery is underway, tempting traders to buy, only for the next wave of selling to sweep that optimism straight off the chart. That is the trap a bear flag can create. The temporary bounce is often not a reversal at all, but a short pause within an established downtrend. Recognising the difference helps traders avoid buying directly into renewed bearish momentum. This guide explains how to recognise a bear flag, identify a confirmed breakdown and compare three possible entry methods. It also covers where to place a stop-loss, how to calculate a measured target and how to control risk when the pattern fails, because, like every chart pattern, it sometimes will. A bear flag is a bearish continuation pattern that forms during a downtrend. It consists of a steep price drop called the flagpole, followed by a small upward or sideways consolidation called the flag; a candle close below the flag’s lower boundary signals that the downtrend may be ready to resume. A bear flag is a bearish continuation pattern that develops after a strong downward price move. It indicates that sellers may be pausing rather than abandoning the downtrend, with the pattern completing only when price closes below the lower boundary of the consolidation. The pattern appears during an established downtrend and has two recognisable sections. The first is the flagpole, created by a sharp fall in price, while the second is the flag, where price consolidates inside a small upward sloping or sideways channel. If price breaks and closes beneath that channel, traders may interpret the move as evidence that bearish momentum has returned. A bear flag is bearish, not bullish, even though price often rises while the flag itself is forming. In simple terms, buyers manage a controlled recovery after the initial sell-off, but their buying pressure is not strong enough to reverse the wider trend. Sellers then return near the upper part of the channel, and a confirmed breakdown shows that they may be regaining control. A continuation pattern is a chart formation that appears during an existing trend and suggests the trend is more likely to resume than reverse once the pattern completes. Flags, pennants and rectangles are common examples, each built from a strong move followed by a short pause. The terms bear flag and bearish flag refer to the same chart pattern. However, an upward drift alone does not create a valid bear flag: it must follow a clear downward impulse and eventually produce a confirmed break below the flag. Without those features, a trader may simply be looking at an ordinary consolidation or trying to persuade the chart to see what they want to see. Read more: 15 Best Chart Patterns UK Traders Use to Analyse the Market A bear flag has four main parts: the flagpole, the flag, the breakdown and the accompanying volume behaviour. Each part provides a separate clue, and the pattern is more convincing when all four tell the same bearish story. The flagpole is the sharp, near-vertical drop that occurs over a relatively small number of candles. It demonstrates the strength of the initial selling pressure, and its length is later used to calculate the pattern’s projected price target. The flag is a compact channel that slopes gently upward or moves sideways, representing a pause in the downtrend rather than a confirmed reversal. As a practical rule of thumb, traders often prefer the flag to retrace no more than roughly 50% of the flagpole and to last around 5 to 20 candles on the trading timeframe; these are visual guidelines, not statistical guarantees. The breakdown occurs when a candle closes below the flag’s lower boundary. This close, rather than a wick briefly pushing through the line, is the signal that sellers may have regained control and is commonly used as the trade trigger. Volume will ideally contract while the flag forms and increase as price breaks lower, supporting the view that sellers have returned. Spot forex has no centralised exchange volume, so currency traders normally use the tick-volume data supplied by their trading platform as a proxy for changes in market activity. Tick volume counts how many times a price changes during a candle, rather than how many units were traded. Because spot forex has no central exchange reporting total traded volume, tick volume is used as a practical gauge of whether market activity is rising or falling. Bear flags, bull flags and bear pennants are all continuation patterns built around a strong initial price move followed by consolidation. Traders often confuse them because they share a flagpole and a pause, but the direction of the existing trend and the shape of the consolidation determine which pattern is forming. The practical difference is simple: trend direction separates a bear flag from a bull flag, while the shape of the consolidation separates a bear flag from a bear pennant. Read more: Bull flag pattern: A practical guide for forex traders Identifying a bear flag means checking its features in sequence rather than spotting a vaguely flag-shaped patch and hoping for the best. Work through the following five steps and reject the setup if the essential conditions are missing. First, confirm that price is already producing lower highs and lower lows on the chart timeframe. Ideally, the next higher timeframe should also point downward; for example, a bear flag on the 1-hour chart carries more context when the 4-hour chart is bearish. Do not move to Step 2 unless a genuine downtrend existed before the suspected flagpole. Read more: How to Read Forex Charts for Traders The flagpole should be a sharp price drop across relatively few candles and noticeably steeper than the price swings around it. Mark and record the price at the beginning and end of this move because the difference between them will later be projected from the breakdown to estimate a target. Move to Step 3 only if the decline is clear enough to stand apart from ordinary market noise. Draw two roughly parallel lines around the candles that follow the flagpole, containing a compact upward or sideways drift. The flag should remain modest compared with the initial decline; if it retraces a large share of the pole or begins creating a stronger bullish structure, the setup may be turning into a reversal. Continue only when the consolidation remains controlled and clearly defined. Check whether tick volume generally declines as price moves through the flag. Falling activity suggests that the bounce lacks conviction and may be a temporary pause rather than the beginning of a strong recovery. If volume expands aggressively as price rises, treat the setup with caution rather than automatically labelling it a bear flag. The pattern is not confirmed until a candle closes below the flag’s lower boundary. A wick that briefly pushes through and then closes back inside the channel is not enough, while an increase in tick volume on the breakdown candle provides additional confirmation that selling activity has returned. Until that close occurs, the bear flag remains a possible setup rather than a completed trading signal. Trading a bear flag begins only after price has confirmed the pattern by closing below the flag. The target is calculated in the same way for all three entry methods: measure the distance from the top to the bottom of the flagpole, then project that distance downward from the breakdown price. The breakdown entry is the most direct approach. The trader enters as soon as the first candle closes decisively below the flag’s lower boundary, provided the other confirmation conditions remain intact. Read more: What is a stop-loss order and how to set it The retest entry waits for price to break below the flag and then return to test the former lower boundary from underneath. The trader enters only if that level acts as resistance and price begins turning lower again. The confirmation entry waits for price to extend below the initial breakdown before entering. A trader might require a second bearish candle, a new lower low or another clear sign that downside momentum is continuing. Whichever method is used, the projected target is an objective rather than a promise. Nearby support, changing momentum or deteriorating market conditions may justify taking partial profit or closing the position before price completes the full flagpole projection. Read more: Breakout Trading: What It Is and Key Strategies for Forex Traders A bear flag works best as one part of a structured trading plan because the pattern alone cannot account for the wider trend, nearby price levels or the amount of money placed at risk. Only take a bear flag when the higher timeframe is also trending downward. Before trading a pattern on the 1-hour chart, for example, check whether the 4-hour or daily chart is producing lower highs and lower lows. If the higher timeframe is moving upward, the apparent flag may simply be a lower-timeframe pullback within a larger bullish trend. Counter-trend flags tend to fail more often because the trader is selling against the market’s broader direction. Read the bear flag together with nearby support and resistance levels. A breakdown that also closes beneath an established support level provides stronger confirmation because two bearish signals occur at roughly the same price. However, major support immediately below the flag can attract buyers and stop the move before it reaches the projected target. Check the available space to the next support level before entering the trade. Use one momentum indicator to filter weaker bear flag setups. For example, RSI remaining below 50 during the consolidation can support the bearish outlook, while a bearish MACD reading may show that downward momentum remains present. Avoid stacking several indicators that all measure roughly the same thing, as more lines do not automatically produce more certainty. The indicator is only a filter and never replaces the required candle close below the flag. Decide the position size before entering the bear flag trade, not after it begins moving. First, fix the maximum account risk, for example, 1%, and measure the distance from the planned entry to the stop above the flag. Use those figures and the pair’s pip value to calculate the appropriate lot size. The stop distance determines the position size; the position size should never be chosen first and then used to squeeze the stop into an unsuitable place. Have a plan for managing the position after the breakdown. A trader might take partial profit as price approaches the flagpole projection, then trail the remaining stop above each new lower high. Another approach is to close the full position at the measured target or earlier if price reaches major support and bearish momentum fades. Whatever the method, never move the stop farther away simply to avoid accepting a losing trade. The following GBP/USD example shows how the complete bear flag calculation works on a 1-hour chart. All prices are illustrative rather than historical, and the example is for education only. GBP/USD falls from 1.2780 to 1.2680, creating a 100-pip flagpole. Price then rebounds gradually inside a flag between 1.2680 and 1.2705 before a 1-hour candle closes below the lower boundary at 1.2675. The trader sells at 1.2675 and places the stop at 1.2710, which is 5 pips above the flag’s upper edge. The distance from entry to stop is therefore 35 pips. Projecting the 100-pip flagpole downward from the 1.2675 breakdown produces a target of 1.2575, giving 100 pips of potential reward. The trading account contains $10,000, and the trader limits risk to 1%, or $100. Dividing $100 by the 35-pip stop gives a maximum value of approximately $2.86 per pip, so the trader rounds down to 0.28 standard lots, worth approximately $2.80 per pip on GBP/USD. This produces $98 of actual risk, a potential gain of $280 and a risk-to-reward ratio of approximately 1:2.86. The risk-to-reward ratio compares the amount a trader stands to lose if the stop-loss is hit with the amount they stand to gain if the target is reached. A ratio of 1:2 means the potential gain is twice the money placed at risk on the trade. After the entry at 1.2675, GBP/USD continues lower and eventually reaches the 1.2575 projected target. The 100-pip move multiplied by the approximate $2.80 pip value produces a $280 gain, before any trading costs or slippage. The outcome represents approximately 2.86 times the $98 initially placed at risk. Alternatively, price could break below the flag, reverse sharply and close back inside the channel before rising to the 1.2710 stop. The 35-pip loss at approximately $2.80 per pip would cost $98, keeping the damage below the trader’s $100 risk limit. The trader does not widen the stop or re-enter immediately. Another position is considered only if a fresh candle closes below the flag, the wider downtrend remains valid, and the new setup independently satisfies the trading plan. Both outcomes are normal possibilities. The pattern identifies a structured opportunity, while fixed risk ensures that 1 failed trade remains manageable rather than becoming an account-changing event. Read more: What is a pip in forex trading? How to calculate and use it Read more: 10 Forex risk management tips every trader should know Bear flag trading offers a clearly structured way to join an existing downtrend, but that clarity does not remove the risk of false signals or poor market conditions. The bear flag generally suits patient, trend-following traders who are comfortable waiting for confirmation and accepting small controlled losses when a breakdown fails. No chart pattern works every time, and a bear flag should never be treated as a guaranteed signal. Its reliability depends on the surrounding market conditions and the quality of the confirmation rather than the pattern’s shape alone. Even when every condition is present, the market can still reverse because of changing sentiment, unexpected news or orders around nearby support. The bear flag is therefore a decision-making framework, not a crystal ball with trend lines drawn on it. Even a well-drawn bear flag can become an expensive lesson when the trade is entered too early, sized badly or taken without checking the wider market. The following mistakes are preventable when the rules are decided before the order is placed. A bear flag is bearish because it is a continuation pattern that forms during a downtrend. The upward or sideways movement inside the flag normally represents a temporary pause rather than a confirmed recovery. When a bear flag completes, price is expected to break below the flag and continue lower, potentially towards the projected flagpole target. However, false breakdowns occur, so a stop-loss and controlled position size remain essential. The reliability of a bear flag depends on factors such as a clear prior downtrend, higher-timeframe agreement, supportive volume behaviour and a candle close below the flag. No bear flag is guaranteed to continue lower, regardless of how tidy it appears on the chart. Measure the price distance from the beginning to the end of the flagpole. Project the same distance downward from the breakdown point to estimate the bear flag target. A stop-loss is commonly placed above the flag’s upper boundary. When using a retest entry, it may instead be positioned above the retest high, provided the placement gives the trade reasonable space while keeping account risk controlled. Both are bearish continuation patterns that form after a sharp decline. A bear flag consolidates inside a roughly parallel channel, whereas a bear pennant contracts inside a small triangle with converging boundaries. A bear flag is a bearish continuation pattern that forms during a downtrend and is confirmed only when a candle closes below the flag’s lower boundary. Before trading it, confirm the existing downtrend, measure the flagpole, draw the flag boundaries, check volume and wait patiently for the closing breakdown. Project the flagpole downward to estimate the target, place the stop above the flag or retest high and limit risk to a fixed amount, such as 1% of the trading account. In my view, the pattern is most useful when it creates a repeatable decision process, not when it is treated as a promise that the market owes anyone another leg lower. Lee W. is a seasoned professional trader with over 10 years of experience. Passionate about sharing valuable expertise and unique market insights, Lee W. now serves as an external and independent market analyst for RADEX MARKETS. Reviewed by RADEX MARKETS Risk Warning Trading derivatives and leveraged products carries a high level of risk, including the risk of losing substantially more than your initial investment.

South Korean and Japanese stocks got hammered yesterday, as investors fled from an increasingly fragile regional semiconductor market. The Korean Kospi index fell over 9% at one point on Thursday, triggering yet another circuit breaker – the tenth of the year so far – before settling for a more modest 7.5% daily loss. The index has fallen 40% from its record high registered in June and yesterday marked the lowest daily close since April. Samsung and SK Hynix, which together account for half the index, lost 9.5% and 11% respectively. The selloff in semiconductors hit Japanese markets just as hard; Tokyo Electron suffered an 8% loss; Kioxia Holdings fell over 12%; Advantest suffered a 15% drop; the list goes on. The Nikkei 225, having a greater breadth of industry to draw from than its Korean counterpart, only incurred a 5% loss when all was said and done, which is nevertheless one of the worst drops in the index’s history. Over in Taiwan, TSMC also experienced minor selling pressure, dragging the company to a 2% loss, despite publishing record-breaking profits in the third quarter. Markets are beginning to worry about the long-term viability of the semiconductor trade, not necessarily in terms of demand but more so in terms of profitability. The sector is expected to face increased competition from China and other parts of the world over the coming years, expanding the pool of manufacturers vying for the same buyers. On top of that, recent inflation data in the US points to elevated rates on the dollar, which affects local exchange rates and borrowing costs. Most raw materials still need to be purchased in dollars, directly impacting the bottom line of chipmakers, to say nothing of the increase in energy and shipping costs. International investors are well aware of the structural problems facing the South Korean stock market and many are now looking for the exit. Foreign capital poured into Korean semiconductor firms earlier in the year, which helped to propel the Kospi index to a colossal 120% rise between January and June, but those same pools of money are currently being rotated back out. Domestic demand is clearly insufficient to prop up prices any longer, as evidenced by the 40% drawdown in the Kospi index. US markets have completely shrugged off this week’s CPI and PPI readings, despite the inflation data itself being absolutely terrible. Wednesday’s CPI data revealed a sizeable uptick in both headline and core inflation, while Thursday’s PPI report indicated a massive rise in wholesale inflation to 6.3% year-over-year. Markets completely absorbed the bad news, so much so that interest rate expectations barely flinched. Everyone knows that rate hikes on the dollar are coming and yesterday’s awful PPI figures do not make such adjustments any more likely than they already were. The dollar currency index actually dropped on Thursday, while US equities rose higher, despite the contagious selloff in the tech sector. The Dow Jones and S&P 500 gained 1.1% and 0.3% respectively, while the Nasdaq-100 remained flat on the day. US growth remains strong, giving the economy far more leeway to tolerate the problems that usually come with sticky inflation. Yesterday’s retail sales figures smashed expectations, showing a 6.3% year-over-year increase in activity, further diminishing the impact of the rough inflation print. In a fireside chat this morning in Bangkok, Fed Chairman Kevin Warsh soothed investor fears even further by highlighting robust structural growth in the US economy and refusing to panic over the recent PPI release. #KOSPI #NI225 #SEMICONDUCTOR About the Author Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS. Reviewed by RADEX MARKETS Risk Warning: Trading derivatives and leveraged products carries a high level of risk, including the risk of losing substantially more than your initial investment.