Why Forex Trading?

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Forex refers to the Foreign Exchange, and this type of trading has just started to be widely available for common investors. A decade ago it was impossible for individual traders to have access to the Forex market and Forex brokerage houses, but today Forex traders can take advantage of the Internet and online brokerages to access this market.

The Forex Market

As the largest market, and the one with the highest level of liquidity, the Forex market offers numerous benefits for traders. Individual traders can access the same trades as central banks and online financial institutions, and this market involves a daily volume that is typically between $4 trillion and $6 trillion, and this is in US dollars. The Forex market is considered an asset class, and it is often used for risk mitigation by large organizations and funds, as well as profits from successful trades.

The Forex market is an over the counter market, and that means that dealers and brokers have direct dealings. These entities facilitate trades on the market, and they ensure that there is a 24 hour trading environment available for five and a half days a week, as long as the parties are willing to trade. The largest market volume normally occurs during the London trading hours. A little more than one fourth of the trading on the Forex marketinvolves pairing of the EUR/USD, so any events or news may affect this pairing more than other currency pairings.

Retail Forex Trading

Over the last few years the retail brokerage houses have made retail Forex trading affordable, and it is highly accessible as well. Beginners in the Forex market can start out using a paper account or demo, so they do not risk capital until they are comfortable trading and experienced in the Forex market.

The Benefits of Retail Foreign Exchange Trading

Retail Forex trading offers many benefits. These include:

  • A 24 Hour Market - The Forex market is the only market that operates on a continuous basis, because of the geographical dispersion between the various markets around the globe. Forex trading is not available on Saturdays and Sundays.
  • Commission Free - Forex trading does not involve commissions. Traders pay for the spread involved, and this can be as small as 2 units at four decimal places.
  • Recession Proof Market - Traders can make profitable trades on the Forex market regardless of whether there is a bull or a bear market trend. The market is bi-directional, and traders can buy and sell both.
  • High Leverage - Forex brokers may offer traders 100 times leverage, or even more favorable credit terms, for every dollar invested. This can help keep contract costs down and potential profits higher. Traders who only have a small amount of capital can take advantage of this leverage to get more lucrative successful trades.
  • Highest Market Trading Volume - The Forex market has the highest market trading volume out of all the markets. The daily volume can range from $4 trillion US dollars to $6 trillion US dollars. No other market can compete with this volume of trading.