Benefits of Forex trading

What is Forex trading?

Forex is an acronym for Foreign Exchange Markets. Forex is further denoted by the symbol FX a well known term among investors, bankers and stock brokers across the world. The Foreign Exchange Market or currency market is a global decentralized market for trading of currencies. Major international banks are the core participants in the FX market.

Financial centers around the world provide a convenient platform for trading in currencies among multiple buyers and sellers round the clock with the exception of weekends. And the FX market operates on several levels.

Let us briefly look at some unique advantages of FX trading.

1. 24 hour market

As already mentioned in the introductory paragraph the FX trading operates on a 247 basis with the exception of weekends. Trading across the world starts when the markets open in Australia on Sunday evening and closes when markets end at New York Stock Exchange on Friday evening.

2. High Liquidity

Liquidity is when you can easily convert an asset into cash with minimum price fluctuations. In FX market one can easily effect transactions by moving huge lots of foreign currencies in and out of the market with least price fluctuations.

3. Low transaction cost

As per FX terminology the cost for a transaction is added with the price i.e. buying price of the currency itself. This in other words is called a spread. Spread is the difference between the buying price and the selling price.

4. Leverage

The leveraging factor is nothing but the ability to trade more money in the market than what is actually available on the traders’ account. Forex brokers allow traders to make profits on the leveraging factor. If you are allowed to trade on a leverage factor of 50:1 ratio it means you can trade for $50 with $1 capital available on your account. You can control a trade volume of $50,000 with just $1000 worth of capital.

You need to open a Forex trading account online to be able to buy and sell foreign currencies. For every FX currency you buy your account will be credited with the aforesaid amount. For every FX transaction you effect in terms of selling the corresponding currency will be debited from your online Forex Account. The profits you incur of the same will be wired directly into your account through Paypal.

5. Profit potential from rising and falling markets

You can trade freely in the market as far as your potential goes. If you feel a currency price will go up, you can buy it, in other words, go long. Increased currency price indicates you can sell it at the much increased price. You can compensate for huge profits by trading on volumes. On the other hand, if you feel the currency value is going to drop, you can sell it or go short.

Seasoned stock traders can make huge amount of profits and even become overnight millionaires. On the other hand if you crave for huge amount of profits and start trading without following the tricks of the trade you can also end up losing a lot of money. Thus you should exercise caution while you are operating in the Forex market or stock market.