Study Materials

Introduction: Why Forex?

Forex, also known as foreign exchange, is the largest and the most liquid market in the world. Its retail part has come with the development of the internet. This allowed retail clients to trade Forex online via various trading platforms. Forex opened its doors to retail clients in the late 1990's. At this time the first retail online brokers started their operations. Forex, as a market had been functioning for decades before that, it was just that it only accepted institutional clients. Currently there are trillions of US dollars traded daily on the Forex market, with retail clients contributing nearly 5% of the total volume or around 5 trillion US dollars in daily turnover. Why is the Forex market so large? Large multinational trade companies, financial institutions, hedge funds and lots of other companies require foreign currencies to operate their businesses. As you may understand, one currency is bought online for another currency, and this creates quite a reasonable flow of funds. In other words, Forex is the global place for trading currencies.

Accessibility : It’s no wonder that the Forex market has the trading volume of 5 trillion a day – all anyone needs to take part in the action is a computer or mobile device with an internet connection.
24 hour Market : The Forex market is open 24 hours a day, so that you can be right there trading whenever you hear a financial scoop. No need to bite your fingernails waiting for the opening bell.

Narrow Focus : Unlike the stock market, a smaller market with tens of thousands of stocks to choose from, the Forex market revolves around more or less eight major currencies. A narrow choice means no room for confusion, so even though the market is huge, it’s quite easy to get a clear picture of what’s happening.

Liquidity : The foreign exchange market is the largest financial market in the world with a daily turnover of just over $4 trillion! Now apart from being a really cool statistic, the sheer massive scope of the Forex market is also one of its biggest advantages. The enormous volume of daily trades makes it the most liquid market in the world, which basically means that under normal market conditions you can buy and sell currency as you please. Unlike the risks of trading stocks, you can never be in a jam for currency to buy or stuck with currency that you cannot unload.

The Market cannot be cornered : The colossal size of the Forex market also makes sure that no one can corner the market. Even banks do not have enough pull to really control the market for a long period of time, which makes it a great place for the little guy to make a move

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