Forex trading, or currency trading, or FX trading, as it can be also abbreviated, are all terms that describe the currency exchange market as we know it today, which refers to the global, decentralized marketplace where individuals, companies and financial institutions exchange currencies for one another at floating rates.
The forex trading marketplace, is the world’s biggest and largestmarket due to the amount of factors which include, ease of performing transactions over the internet, the modern development of travelling, ease of international communication and modern transportation, which have made our world a smaller place, this automatically means that people, goods and services can travel faster and more easily. This also means that a necessity of currencies to be traded against each other is needed in order for this to happen. All these have determined a growing forex trading marketplace, which will only continue to grow and become more dynamic, liquid and responsive.
Amidst the participants of the forex trading market, one of the most growing area of the total pool of participants of the marketplace, are retail foreign exchange traders (individuals) who participate in online forex trading for mainly hypothetical reasons with the ultimate goal of generating a profit from currency fluctuations (market changes), or hedging unwanted currency risk.
Engaging in the forex trading marketplace means that the client has access to real-time pricing of the forex marketplace. The client has the freedom to decide at which price they decide to buy or sell, and vice versa, and can execute a transaction at any time they wish.
Trading all over the globe is possible due to the following
1. 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. Once trading ends in one country, it begins in another.
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.
2. AVAILABILITY OF HIGH LEVERAGE AND EXTREME LIQUIDITY:
This have aided in the rapid growth of the forex trading market. It has become a great platform for traders around the globe.
3. CURRENCY PRICES:
This 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.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.