• Home
  • Introduction to Forex Market

Introduction to Forex Market

Introduction to Forex Market

Benefits of Forex Market Trading

The foreign exchange FOREX/FX market has emerged as the largest financial market in the world owing to its accessibility, liquidity, and international nature, among a host of other factors. You can buy and sell currency over the counter to turn a profit, as there exists no physical exchange for such trading, unlike other markets.

Here are the top benefits of forex trading:

  1. Global Market: The Foreign Exchange or Fx market has a vast global reach, attracting traders from every corner of the world. This market’s significance is apparent, as it sees an average daily exchange of over $7 trillion in currency. The market’s enormous scale makes it an attractive option for trading, presenting numerous opportunities for profit. As such, it can be a beneficial starting point for beginners looking to enter the world of trading. The Forex market experienced a 37% increase in the number of traders during the Covid-19 pandemic.
  2. Good for beginners: The forex market is a great place for novice traders, as it allows them to enter with small investments. One of the significant benefits of forex trading is that brokers provide demo accounts, which beginners can use to practice their skills in a simulated trading environment before engaging in actual deals. This feature provides an excellent opportunity for inexperienced traders to gain confidence and build their skills before investing significant amounts of money.
  3. Round the clock market: The forex market operates round the clock due to its global nature, with trading taking place almost continuously as long as any market is open worldwide. The market is operational for five days each week, 24 hours a day. The trading starts on Sunday at 5 pm in Australia’s Sydney and ends on Friday at 5 pm when the New York market closes in the US. This characteristic makes forex trading accessible to traders from different time zones, providing flexibility and ample opportunities for trading at any time of the day.
  4. Leverage: Forex brokers offer retail traders the opportunity to leverage their small capital, allowing them to open positions with higher values. Leverage is typically represented as a ratio, indicating the amount of money borrowed compared to the trader’s actual investment. For instance, a leverage ratio of 1:30 implies that the trader can access funds that are 30 times the amount invested in the market. This feature of forex trading can enhance potential profits, some brokers also offered 1:500 leverage, but it also increases the risk of losses, so traders must use leverage judiciously.
  1. Liquidity: The forex market is renowned for its high liquidity, owing to the substantial trading volume that takes place continuously worldwide. Liquidity refers to the ease with which assets can be bought and sold without significantly affecting their value. The forex market’s liquidity enables traders to execute transactions with minimal risk, as they can buy or sell currencies quickly and efficiently without worrying about market fluctuations. New York Session is highly liquidated.
  2. Market Volatility: Geopolitics, economic stability, policies, natural calamities and trade deals are among a long list of forces that influence the market. A small development in any of these translates into a major shift in the market. This sensitivity of a market is called its volatility. When values of currencies change for the better due to these determinants, they result in major profits. However, if the values are affected adversely, traders can suffer significant losses. Since volatility cannot be avoided altogether, you should go about having strategies to deal with volatile markets.
  3. No restrictions on directional trading: Directional trading is unrestricted in the forex market, unlike in the stock market. Traders can freely buy or sell currencies based on their market predictions, allowing them to go long or short as per their assessment of currency values. Additionally, due to the high liquidity of currencies, brokers do not charge any transaction fees for such trades, which are often required in stock markets.
  4. Decentralized Market: The forex market comprises a vast number of participants, which ensures that no single entity can control the market, and only external factors such as the economy can influence prices. This feature underscores the significance of foreign exchange as an investment option in traders’ portfolios. Unlike other markets, there are no intermediaries involved in the forex market, and brokers only facilitate transactions between buyers and sellers.
  5. Low transactional charges: Online forex trading can be initiated with a small amount of capital as low as $10, and traders do not have to incur significant costs associated with transactions. The cost of transactions primarily consists of the broker’s fee, which is typically earned through spreads. Spreads are measured in pips or points as a percentage and represent the difference between the ask price and the bid price.
  6. Technology: One of the benefits of the foreign exchange market is that its participants have readily adopted technology, given that it is a relatively new market. There are numerous software and mobile applications available that enable traders to conduct transactions in real-time from anywhere in the world. What you just need is a mobile phone and internet to transform yourself into professional trader.
  7. Wide range of instruments: Forex trading offers a wide range of instruments, including currency pairs, commodities, and indices, which allows traders to diversify their portfolios. There are hundreds of pairs available on trading platforms like Major, Minor, Exotic. apart from Forex Pairs Metals, Indices, Crypto Equities, Bonds ETF are also available to trade.
  8. No insider trading: Unlike the stock market, forex trading is decentralized, which means that there is no insider trading or manipulation by a small group of individuals.
  1. Educational resources: Most forex brokers offer educational resources, such as webinars, articles, and tutorials, to help traders improve their trading skills and knowledge. Forex brokers commonly provide a variety of educational materials to support traders in enhancing their trading proficiency and knowledge. These resources are usually accessible in the form of webinars, articles, and tutorials. YouTube videos and online classes, Webinars etc.  Sikhnomics also providing free contents to its aspirants to enhance their knowledge in FX market.

Leave a Reply

Your email address will not be published. Required fields are marked *