Why people engage in foreign currency trading
The global market requires individuals and businesses from all over the world to trade in currency in exchange for the other. According the Bank of International Settlements (BIS), participants in the global market trade more than $15 trillion U.S. dollars worth of currencies per day. This is unsurprising considering the market is constantly moving regardless of time and date.
The Value of Forex Trading
For investors who are just starting out, many opt to start in Foreign Exchange trading or start foreign currency trading as a launch pad for their career. The reason for this is because the Forex market is the largest in the world in terms of daily transaction volumes and contains several of the following features:
1. Robust Liquidity
Liquidity in trading means exchanging currencies is generally easier especially when you wish to trade one asset to another. Since the Forex market is generally large, its size allows traders from all over the world to enter and exit positions with ease. Another advantage to robust liquidity is the fact that it can offers traders low transaction costs especially when they set up trades in the market. High liquidity also protects traders from price manipulation since the market becomes less vulnerable to immediate changes. This makes trading in the Forex market more stable and less likely to change compared to other markets which are often subject to volatility.
2. Available for 24-hours
Markets dealing with foreign currency trading are generally open for 24 hours a day, seven days a week, which is convenient for traders all over the world. Being open 24/7 also provides greater options for investors and makes it easier for beginners and part-time traders to fill in this activity in their schedule. This is ideal for those who are busy with other commitments but would still like to engage in the market from time to time.
3. Substantial leverage
Traders who deal with foreign currency instead of stocks can obtain greater leverage. This means traders may borrow a certain amount of money from others in order to invest in something worthwhile. For traders, they usually borrow from brokers. A market that offers high leverage also means that the initial margin requirement for trading can be controlled by the trader whether they wish to attribute more than the required for any position.
Is Foreign Currency Trading worth it?
When it comes to trading and investments, managing foreign currencies can be considered one of the more stable assets to deal with. While they are not immune to changes and other market factors, trading with currencies is a great way to start one’s career since there are various currencies available, high liquidity features which means low transaction costs, and is available 24/7 which is ideal for those who are still committed to other jobs.
Nearly everyone who is willing to put the work in can become a Forex trader although constant research and market study is one way to help manage things well. While we cannot eliminate risks entirely, the fact of the matter is that foreign currency trading is one market that simply won’t go away anytime soon.
By: John Pearson
John is a serial entrepreneur and writer who is passionate about helping small businesses launch and grow. His work has been featured in Huffington Post, Entrepreneur, and Forbes.