Interested in Forex Trading?
The foreign exchange market (Forex) has no central exchange location yet it is the largest financial market in the world. It is over 3x's the size of the stock and futures markets combined and operates via an electronic network of a banks, corporations and investors.
Foreign exchange consists of a simultaneous buying of one currency and selling of another. Currency is traded in pairs, in other words, one currency is traded for another. The major currencies are:
- USD — United States dollar
- EUR — eurozone's euro
- JPY — Japanese yen
- GBP — Great Britain pound
- CHF — Swiss franc
- CAD — Canadian dollar
- AUD — Australian dollar
- NZD — New Zealand dollar
There are 2 types of investors involved in the Forex market. The first type of investor is the hedger. The hedger is involved in international trades and utilizes Forex trading to protect their interest in a transaction from adverse currency fluctuations. The second type of investor is the speculator who invests in currency solely for profit.
Currency prices fluctuate due to a variety of economic and political factors. The major factors are:
- Interest rates
- International trade
- Political stability
There are many reasons investors take a great interest in FX trading. Some of the major reasons are:
- No fees except Bid/Ask spread
- No fixed trade sizes
- Low transaction cost
- High liquidity
- Instant transactions
- Low margin — high leverage
- 24-hour market
- Online access via online trading platforms
- Always good opportunities to trade. Unlike the stock market the market is never inherently bullish or bearish.
- No one entity can control the market
- No insider trading can occur
To begin trading in the Forex market, an investor only needs a computer, a high-speed internet connection, and an online trading currency account. A mini account can be opened for as little as $100. Some brokers even offer micro accounts that start with just $1.
These are some of the reasons why Forex trading has become quite popular in recent years.
by Jill Kane