Swapping currencies is the main game in the Forex world. Foreign Exchange Trading, or Forex, is the largest market in which currencies are traded for profit. In the Forex market, USD, Euros, British Pounds, Canadian Dollars, Swiss Francs, Australian Dollars, Swedish Kronas, Hong Kong Dollars, and Norwegian Kronas are among the top ten currencies traded. Prices of currencies change according to supply and demand. The value of a currency can be affected by other factors, such as the interest rate and the financial and political status of a country. Participants on the Forex basics market range from large corporations, banks and small business to individual traders.
There are also 10 other unique advantages of Forex trading which attract thousands of traders every day from around the globe. We’ll look at each one individually.
1. Forex is open 24 hours a day.- Forex does not sleep. The Forex market is open 24/7, allowing traders to trade at any time. The activity of the Forex market fluctuates throughout the day. Any veteran Forex trader will tell you the best times to trade are when the activity is highest. (We will explain why later). The Forex market has four main sessions. New York, Sydney Tokyo, and London are the four major sessions. The market is open 24/7 because, when one trading session ends, another is immediately opened. When two sessions overlap, the most active time on the market occurs.
2. Liquidity – The amount of trading (buying or selling currencies) at any time is determined by market size. Forex has the most liquidity of any market. The Forex market is the most liquid of all financial markets.
Remember how we said in Point 1 that it is best to trade when the market has the most activity? Why? This is because the peak is also when liquidation is highest. The most trading occurs at this time, which leads to more exchanges and better deals. The volatility of the currency market (and its price fluctuation) are at their lowest. When the price of a currency is high, it’s easier to profit quickly by trading on spot. When liquidity is low, trades are slow, and prices fluctuate slowly. Also, it is important to note that price fluctuations are dramatic. It is easy to lose your money at this time.
3. Leverage – This feature, in layman’s language, allows the trader the ability to trade with more than what is on the account. The trader can make huge gains by only investing a little. The trader can choose the leverage in most cases. Leverage can be expressed as a percentage. Say you invest $500 in your account, and you enter a trade at a 50:1 leverage ratio. For every dollar you invest, you are able to trade up to $50. Leverage allows you to trade with up to $25,000 for just $500.