Forex, the foreign exchange market, is by far the largest market in the world. The preliminary report of the Bank of International Settlements (BIS) of April 2013 indicated a record volume of $ 5.4 billion per day. This figure far exceeds the daily volume of all the world’s stock markets combined.
For you, potential trader, this means that the liquidity of the exchange markets is very high; large amounts of foreign currency are easily bought and sold without the prices being materially affected. In return, this also implies greater stability of the courses. In addition, since currencies are traded in pairs-the value of which is determined by reference to the value of another-the value of a currency pair is usually traded within a certain established trading range. This is the opposite of the stock market, which is known for its vulnerability to full crashes under certain conditions.
Trading 24 hours a day
Unlike equities, bonds and options, foreign exchange markets remain open from Monday to Friday. Each day of trading actually counts three because the opening and closing of the Asian, European and American markets overlap within a single day. In fact, there is no need to wait for markets to open, they are still available. With the use of the avatrade trustpilot review you can now understand the kind of process it follows.
Profits in the markets both upwards and downwards
Forex traders buy or are “long” when they expect a currency pair to appreciate in value and sell – they are then “short” – when they expect that a currency pair loses value. However, as currencies are always quoted in pairs, all positions you open involve being long on one currency and short on the other. So when you buy the EUR / USD pair, for example, you are long on the first currency of this pair and short on the second. As a Forex trader you can easily position yourself profitably, regardless of the underlying market situation. All investment tools do not allow it. Stocks are the perfect example because even though investors may sell short, shorting is both more complicated, riskier and sometimes involves additional costs compared to buying or long positions.
Low brokerage and transaction fees
The large number of market participants and the fierce competition among brokers are two factors that have lowered brokerage and transaction fees relative to other financial instruments. It is a fairly recent phenomenon; the exchange markets were traditionally reserved for institutional investors and very wealthy individuals, because of the high margin and volume requirements imposed by banks. With the growth of the retail market came into play brokers who combine the positions of small investors and take them back to the markets. In the past decade, the margin and volume requirements have dropped so much that you can now open a Forex account and start trading with just $ 500. In addition, the competition for your trades keeps raging between retail brokers, in recent years have been marked by a tightening of spreads and lower commissions. Online Forex has in fact become one of the most economical investment tools available to retail traders.