Is the foreign exchange market a perfect competitive market?

Answer 1

Yes, it certainly is competitive, and one of the reasons for that is that it involves margin. Margin indeed is what makes forex trading so popular. what is margin, or what are margin accounts?

Forex margin accounts allow traders to control a large amount of currency with only a small deposit. This allows everyone with a computer and an internet connection to get started with currency trading. On the one hand, trading on margin increases your profit potential, but on the other hand it also increases your risk of losses. If the market crashes, then it could be possible for a trader to lose more money than the original deposit - and end up in debt to the broker. However, most online brokers will end a trade if it falls below the amount deposited, minimising your losses - but you'll still have lost the money that you had deposited, you just won't end up owing a lot more. For more information on margin, check out the websites below.

At times however, some nations like China, artificially devalue their currency. This distorts the true value of their products.