The Most Fascinating and Fast Paced Markets Around the Globe
In the past, Forex trading was done only by the large corporations, financial institutions, central banks, and extremely wealthy people. However, now the internet has changed everything. Even the average investors can buy and sell currencies using online brokerage accounts.
Whether you realize it or not, currencies are constantly exchanged worldwide to carry out foreign business and trade.
Elasticity of the Market
The Forex trading is the largest liquid financial market across the globe. Even the stock market is not as big as this one. The unique thing about this global market is that there isn't any central marketplace for foreign currency exchange. The exchange of currencies is carried out electronically between the traders throughout the world.
This market is open throughout the week for 24 hours, and the currencies are exchanged in the big financial centers such as New York, London, Frankfurt, Zurich, Singapore, Sydney, Hong Kong, and Paris. Once the trading day ends in Hong Kong and Tokyo, it begins in the USA.
Everyday currency fluctuation is very small. When currencies are exchanged, it means that they are bought and sold, in pairs. Generally, the exchange rates between the currency pairs fluctuate less than 1% in a day. This makes the foreign exchange the least volatile of all the other markets. Availability of high leverage and extreme liquidity have aided in rapid growth of the Forex trading market. It has become a great platform for traders around the globe.
Currency prices cannot be moved easily due to the sheer size of the market. Even the big players like central banks cannot move the currency prices as and when they want. This means that the forex market offers a lot of opportunities to the investors. However, to be successful, one needs to understand the basics of currency movements.
What's Good and Bad About Foreign Exchange?
Factors like global economic structure, volatility, and trading size contribute to the success of the foreign exchange market. Due to high liquidity, investors can place large trades without any worry. Large positions are available to traders due to the small margin requirements by most of the forex market brokers.
You can get into small trades and make proportionately higher profits by using the leverage offered. You need to be smart while using the leverages, because the prices can also move against your speculations. Regardless of the risks, it is the leverage opportunity in this market that makes it more attractive for many.
Since online currency trading is open for 24 hours in a day, investors who are full time employed and have a busy schedule can trade currency pairs whenever they want. You do not have to wait for it open or close as the trading hubs are spread throughout different time zones.
If you are interested in the foreign exchange market, then you could first start trading with small amounts. Forex trading is not like a casino, where you will be betting blindly. Here you will need to keep an eye on important charts and indicators, do the analysis, and then make your moves. Only then will you gain the confidence to invest bigger amounts and earn more profits.
When you choose a broker, don't just go for those who are offering low or tight spreads. Research the brokers well, and choose the ones that offer best guidance and customer support to their clients. Proper support from your broker will be important in the long run.
By Lovisa Alvin