Features of Forex Trading
- Forex is the most popularly traded market in the world and when you look at the specific features of forex trading, it is easy to understand why.
Forex – the most liquid market in the world
Forex is the most liquid market in the world, meaning that forex market spreads tend to remain tight throughout most of the day, whilst traders have the safety of the knowledge that positions and orders can always be executed. With an average turnover in excess of US$4 trillion per day being traded by governments, central banks, financial institutions, corporations and professional and retail traders, foreign exchange is the largest financial market in the world. In comparison, the New York Stock Exchange has a daily turnover of around US$50 billion.
Forex is a 24-hour market, and is traded continuously round the clock, except on weekends, meaning that traders have unlimited access.
Meaning that Forex platform is available to trade 24-hours a day, from Sunday evening GMT to Friday night GMT.
Forex trading is leveraged and traders utilise this leverage to increase their exposure to currencies and magnify their potential profits. With leverage, you can control a relatively large exposure for only a small initial deposit amount in your trading account, potentially maximising your return on investment.
Most of the broker house will provide competitive margin rates in the retail forex industry and their ‘Leverage to Suit’ model enables you to select your preferred leverage ratios to suit your specific trading strategy and style.
It is important to remember however that leveraged forex trading involves greater risk of loss and may not be suitable for everyone. You can lose more than your initial deposit if the market moves against you.
Foreign exchange rates can change rapidly in response to any real-time economic and political events. This offers great opportunities for traders to make profits in the forex markets. Of course, volatility can be a double-edged sword, and losses can accumulate just as quickly.
Ability to go long and short
Unlike traditional equity markets, forex trading allows you to trade and profit on any price movement up or down. As a forex trader, you can go long (buy) on a currency pair when you expect the first currency will strengthen (appreciate) against the second currency and your profits will rise in line with any increase as the exchange rate goes up. You can also go short (sell) on the currency pair when you expect the first currency will weaken (depreciate) against the second currency and your profits will rise in line with any fall in the exchange rate.
Range of Markets
You can trade 37 currency pairs including majors, minors and exotic pairs. This means that you can gain instant exposure to currencies such as the Kiwi or Nokki as much as Dollar or Euro.