The Forex Trading market is an international over-the-counter electronic market for the trade of currencies. This marketplace determines international currency rates for each nation. It entails all facets of trading, buying and selling currencies in current or predicted prices. Forex markets are located all over the world where banks, brokerage firms, multinational companies and individuals trade. These individuals and companies use Forex to evaluate their potential for making money through currency transactions.
One of the advantages of Forex trading is its high liquidity. Because there is high liquidity of the currency, every transaction is very liquid. Forex traders can make trades without waiting hours, days or weeks for a particular currency rate to go up or down. Forex has the highest leveraged trades of any market with a small percentage of total number of trades performed each day. High liquidity is very important to high volume trades.
Forex trading is based on the principle that the foreign currency value is based on the value of a United States dollar and the Euro or the Japanese yen in international currency prices. Most foreign currencies traded are the major currencies such as the US dollar, the Japanese yen, the euro, the GBP, the USD, the Swiss franc and the NZD (New Zealand dollar). Forex also uses the major economic indicators like the gross domestic product growth, unemployment and inflation in different nations. These factors influence the strength and weakness of the currency in terms of its national market. To this end, forex trading uses various technical analysis techniques such as charting, graphs, signals, and automated software to get the best information on changes in currency values.
Another advantage of Forex trading is its high leveraged characteristic. Forex leverages the size of the investment made by the trader and hence large amount of trades can be executed in a day. Traders can buy and sell a large quantity of currency quickly. There are some other advantages of forex trading, which make it highly lucrative for its practitioners.
Forex offers a platform for a trader to speculate on the trend of more than one currency. The value of one currency depends on the performance of the other currency in terms of trade. This makes forex trading very attractive for speculators with a large capital. Forex offers large interest rates, thus one can easily convert money into one currency and vice versa. If a trader is able to control the interest rates, then he can exploit the interest rates and earn profits.
Forex also offers opportunities to trade with small amounts of money and a high degree of leverage. Smaller amounts of money imply lower leverage, which makes forex trading suitable for smaller players who have low capital. Forex also offers large interest rates, therefore one can easily convert money to smaller currencies and thus make profits. One has the option to use leverage in currency exchange market to exploit the exchange rate differences between two currencies. These advantages make forex trading highly attractive for smaller players.
