Forex trading, also known as the foreign exchange market is a globally decentralized market where investors trade on currencies. There are multiple financial centers globally, which lay the trading foundation for different types of traders in the market. The Forex market is charged with the responsibility of determining the relative value of various currencies. A number of merits make it one of the best markets to trade in the world.
For instance, it is the biggest financial market globally, transacting over $4 trillion each day. It is thrice as big as the global stock market, besides being rated as the only market nearest to perfect competition. There were strict financial requirements which locked out individual investors some time back, but at the moment even small retail investors can take part.
Market transparency is one of the virtues which should draw investors to explore this field of trading. Forex quotes are driven by economic news and report announcements, which are aired publicly for everyone to access, unlike in stock or commodity marketing.
High levels of liquidity characterize this market, owing to the currency exchange services which are offered by large banks to individual investors and multinational companies so that even the biggest transactions are complete within seconds.
In this field, investors are able to trade within any time of the day all through the five days of the week because the Forex market runs continuously for a period of 24 hours, which means at any time, somewhere in the world, the marketing is open. This flexibility allows you to trade any time from any location in the world.
Both in rising and falling markets, you have the opportunity of gaining. Essentially, if you have a feeling that the market is bound to rise, you buy the currencies. And when you feel the market will go down, you sell the currencies and in both ways you stand to gain and avoid most of the uncertainties that there are in other markets.
The Forex market is easily accessible, especially through the internet. Most retail traders carry out the business either from their homes or at work where they enjoy the flexibility of doing other jobs. There are different forex brokers over the internet, offering advanced tools to aid you in Forex trading if you want to do it over the internet.
The price movements in Forex trading are highly predictable, because there are multiple patterns which repeat themselves over a period of time. This is one of the greatest benefits that a Forex trader reaps because it is relatively easier to trade in a trending market than in a chaotic one.
You will also enjoy high leverage in this market, which is one of the most essential tools in this trading. If you want to make a deal worth $10,000 for instance, on a leverage of 1:500, it means you will only need a deposit of $200. This high leverage makes the Forex market very profitable, although it has its risks involved.
Forex trading is commission free, and the overall costs of transaction are low. Most brokers lower or abolish the commission fee completely because they are compensated by the bid or spread from each currency pair.
In this market, there are no constraints in the type and number of transactions that you make. There comes a time of ‘limit -up and limit -down’ when the price fluctuates beyond the daily levels that had been predetermined. This limits traders from attaining new positions, but they can quit the present ones at their own discretion. This is only meant to control volatility but essentially there is no limitation regarding the number of transactions.
There are a variety of opportunities in this market, provided by several currency pairs from which to select. Every trader has the opportunity of researching on the currency pair that sells the most, so that he or she will invest in it.
Forex trading is relatively easy to execute because you need not analyze price movements in most of the companies but rather monitor a handful of currencies and besides there is no going short or selling on uptick, as is the case with stocks because selling is as cheap as buying in the Forex trading market.
There is an unlimited earning potential in this market, owing to the large amounts that are transacted in this market. No matter how little the profit per currency pair is, the number of transactions that can be done each day is huge, considering the fact that it is a 24-hour trading period, no doubt large profit margins are expected.
Similarly, the market cannot be cornered because it is too huge for any corporation or even government to exert control over. It is entirely driven by supply and demand and hence cannot be skewed by an individual or group of individuals.
There is also the advantage of easy entry because individuals are not regulated as long as a person has the passion for trading in the Forex market and the knowledge needed to start and sustain transactions in this area that experiences a lot of competition.
This market is a two-way profit journey, which enables traders to earn profits both when they purchase currencies and when they will choose to sell them, a virtue that cannot be compared to any other market. Coupled with free trading software, this is the right and near perfect trading opportunity.
Though it has a side of its pitfalls too, the Forex market has merits that far outweigh the demerits. Though there are several people who have incurred losses in this trade, it is also clear that they fail to follow the guidelines and study the market well before trading.
There are multiple indicators which show whether you are bound to lose or gain and once you follow them closely, it becomes the most competitive yet friendly trading ground. In a nutshell, if you need an investment opportunity free of the many hustles that characterize most business opportunities, this is the right business area to explore.
This post is provided by Topbrokerforex.com, a review site of forex broker Indonesia.