Unique, largest, most liquid - that's Forex market for you in a nutshell.
Foreign currency exchange or FX is the world's largest trading market with a daily trade of more than $4 trillion. This figure was reported in April 2007 by the Bank for International Settlement and since then it has been continuously growing.
The process involves buying and selling of different currencies at the same time. Any currency combo is known as a "cross", e.g. the euro-US dollar (EURUSD), or the US dollar-Japanese yen (USDJPY). The most frequently traded currencies are called "majors".
Spot market is the most important Forex market due to its largest volume. It gets its name from the fact that trading is done immediately on the spot. Large investments are made in this particular field and immediate profits can be made here.
Forex trading of different world currencies can be done through any currency anywhere in the world at any time. This is one of the basic reasons for its popularity that it's a 24-hour market and people can do business round the clock. This gives traders an exclusive opportunity of reacting the moment anything affects the market which might make the money value fluctuate. Also one of the forex exchange around the globe id definitely open at one time which allows access to it at any time. A related factor is the easy access. Though the main Forex centres are in Tokyo, London, New York, Frankfurt and Sydney, anyone can make a trade over telephone or electronic networks regardless of where he or she is. This particular feature enables the transaction to be done from home thus making it all the more attractive for the investors.
Another reason for Forex's prominence is the high liquidity. Buyers and sellers are always available to trade with and it is this liquidity that helps make sure that prices remain stable.
For regular investors, the fact that Forex mostly does not involve commission is a definite plus. An interesting fact is that this incessantly moving market always has trading prospects.
Other aspects that make Forex trading a lucrative and interesting business are the availability of leverages, small margin deposits, low dealing costs and differentials in interest rates.
Despite all the excitement and potential profitability, trading the forex market involves some significant risks. Therefore, it is very important for one to fully understand the consequences and pitfalls that different opportunities of the trade offer. It requires competent execution, analysis, expertise and business savvy.
The author is a financial consultant and is advising the website Forex Trading Tips. Check out the website for the hottest tips. |
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