Forex is all about swapping currencies. Foreign Exchange, which is also called Forex or currency trade, is the biggest financial market where one currency can be traded against another to make profits. Top ten Forex currencies include the US Dollar, Euro, Japanese Yuen, British Pound (GBP), Canadian Dollar, Swiss Frank, Australian Dollar ($), Swedish Krona ($), Hong Kong Dollar ($) and Norwegian Krona. These currencies’ prices fluctuate based on supply and demands. Interest rates, the political and financial state of the country and other factors can affect the value. Best forex broker and participants are diverse, ranging from small companies and individuals to multinational corporations and large banks.
Forex trading has 10 benefits that are unique and that draw thousands of Forex traders daily from across the globe. Look at them all individually.
1. Forex trades are possible every hour – unlike the stock exchange, Forex trading never sleeps. Trading is possible at all times of the day and night because Forex markets are open around-the-clock. Trading is best done when there is the highest level of activity on the Forex markets. Forex is split into four sessions. New York City, Sydney, Tokyo, and London. There is always a new session open when the previous one closes. This keeps the market running 24 hours a day. Two trading sessions overlapping is the busiest period of time for the stock market.
2. The Highest Liquidity_ The liquidity is determined by both the size of the market (number of participants active) and number of transactions (buying/selling of currencies at any one time). Forex is the market with highest liquidity. Due to the large number of traders trading currencies, an estimated US $4 trillion in exchange occurs on a daily base.
In point 1, it was stated that trading is most profitable when the markets are at their busiest. The reason is that the market is most liquid during this peak period. It is also the time when there are most exchanges, meaning more good deals and opportunities. It is when volatility is lowest (currency price fluctuations). It is therefore easier to earn a quick profit by doing a spot transaction when the exchange rate is favorable. When the liquidity of the currency is the lowest, trading becomes very slow. Prices fluctuate at a slower pace. The price variations are also very dramatic. This is why it’s easy to make a loss during this period.
3. LeverageIn layman’s terms, it allows the trader trade more than is in the trader’s account. It allows the trader to make a lot of money by investing only a small sum. Most of the time, traders get to select their own leverage. The ratio of leverage is called Leverage. Imagine that you’ve got $500 invested in your trading account. You are going to enter into a transaction with a leverage of 50:1. It means you can invest up to 50 dollars for each $1. With leverage, you can trade for up to $25,000 with just $500.