About FOREX
Forex, short for “foreign exchange,” refers to the global marketplace where individuals, businesses, financial institutions, and governments trade and exchange currencies. It’s the largest and most liquid financial market in the world, where participants buy and sell currencies for various reasons, including commerce, investment, speculation, and hedging against currency risks.
At its simplest, forex trading is similar to the currency exchange you may do while traveling abroad: A trader buys one currency and sells another, and the exchange rate constantly fluctuates based on supply and demand.
Trading involves the frequent buying and selling of stocks, commodities, currency pairs, or other financial instruments with the goal of generating profits that surpass the costs of acquisition and holding.
Currencies are traded in the foreign exchange market, a global marketplace that’s open 24 hours a day Monday through Friday. All forex trading is conducted over the counter (OTC), meaning there’s no physical exchange (as there is for stocks) and a global network of banks and other financial institutions oversee the market (instead of a central exchange, like the New York Stock Exchange).
In terms of trading volume, it is by far the largest market in the world, with an average of $7.5 trillion traded daily.
Here are some of the big advantages of why you should trade Forex:
The most significant risk/reward potential
The Forex market offers some of the best risk/reward opportunities among all financial markets.
The availability of leverage in the Forex market amplifies both profits and losses equally, providing unmatched profit potential for those with limited trading capital only if they learn how to manage risks.
The Most Flexible Trading Hours
The Forex market trades in a continuous 24-hour session, 5 days a week, from Sunday at 5:15 PM EST to Friday at 5:00 PM EST. This allows those with work or family commitments to trade in a fully liquid market whenever it is convenient.
Profit Opportunities in Both Ascending and Descending Markets
Just as it is easier to row with the current than against it, it is easier to profit by trading in the direction of an established market trend. Unlike stocks (and other assets), in forex, it is just as possible to trade markets that are falling as those that are rising. This is a huge advantage of the forex markets.
The Lowest Entry and Trading Costs
Trading in the Forex market has among the lowest entry and trading costs of all financial markets, concerning trading capital and training/equipment costs. Unlike most markets, you don’t need many thousands of dollars to start. This is because in the Forex market, we can typically trade on margin, usually 1% or less. This allows us to gain substantial benefits from small price movements.
The Best Liquidity
A liquid market is one with many buyers and sellers. The more buyers and sellers at any given time, the more likely you are to get a fair market price when buying or selling. The more liquid the market, the easier it is to enter and exit at the stated price or very close to it. Prices are fairer and more stable, less prone to sudden and unpredictable movements.