Overflowing with opportunities around the clock during market hours and no commissions with tight spreads for a standard account – see why forex is the most traded market in the world.
Nine reasons to trade forex
1. Great for short-term opportunities
As the forex market is so vast, it’s constantly offering new opportunities. In fact, most forex trades are held for just a few hours or days.
2. It’s open 24/5
FX markets are open from 5PM EST Sunday to 5PM EST Friday. This is because the different time zones of the forex trading centers (London, New York, Sydney, and Tokyo) mean that at least one is always open (when New York closes, Sydney opens).
3. Unmatched Liquidity
Forex market’s high liquidity is a significant advantage. Being the largest financial market globally, with an average daily turnover exceeding $5 trillion, this liquidity ensures price stability and better trade execution, allowing traders to open and close positions with minimal price manipulation or slippage.
4. Leverage: Maximizing Potential Profits
Forex trading offers significant leverage – a tool that enables traders to control large positions with a relatively small amount of capital. This can amplify potential profits, but it’s important to remember that it also increases the potential risk.
5. Take long or short positions
Unlike some markets where you can only profit when prices are rising, Forex trading allows for the potential to profit in both rising and falling markets. This is because you can buy (go long) or sell (go short) currency pairs depending on your market analysis and predictions.
5. Diverse Trading Strategies and Styles
The Forex market caters to various trading styles, such as day trading, swing trading, and position trading. This versatility allows traders to choose a strategy that best suits their lifestyle, risk tolerance, and investment goals.
6. Sophisticated Trading Platforms
Technological advancements have greatly enhanced Forex trading. Modern trading platforms offer advanced charting tools, real-time data, and a range of analytical tools that help traders make informed decisions.
7. Global Exposure
Forex market trading offers exposure to global economies. It involves currency pairs from all over the world, providing traders with the opportunity to get involved with international markets and diversify their investment portfolios.
8. Educational Resources and Community
There is a wealth of educational resources available for Forex traders. From online courses to webinars, forums, and books, individuals can access a vast array of materials to learn and improve their trading skills. Additionally, a strong community of traders exists, providing a network for sharing experiences and strategies.
9. Regulatory Improvements
The Forex market has seen significant regulatory improvements over the years, enhancing transparency and trader protection. Regulatory bodies across various countries ensure that Forex brokers adhere to strict standards, providing a safer trading environment.
What affects the forex markets?
There’s a reason why forex traders are constantly analyzing the news. Forex is influenced by a plethora of factors, both economic and political, putting the rates constantly in flux.
Economic data
Economic data gives an indication of the health of an economy and therefore the national currency. Unemployment data, government debt, inflation, and interest rates are all figures that forex traders should have on their radar.
Political stability
Major events such as elections, trade deals, conflicts, environmental disasters, and pandemics can all have a profound effect on a currency. Even more minor events such as cabinet reshuffles or small policy changes can also have an impact.
Supply and demand
Supply-and-demand is one of the biggest factors that influences the forex market. If there’s a sudden spike in demand for euros, it reduces supply, and the price will consequently rise.