Advantages of forex trading

Forex refers to Foreign exchange markets. Forex is also represented by the symbol FX which is a familiar term among investors, bankers and stockbrokers across the world. The Foreign Exchange market is a global, decentralized market for the trading of currencies. Forex trading involves buying and selling currencies on the foreign exchange market in order to make a profit. The principal participants in the forex market are major international banks. Financial centres around the world offer buyers and sellers a convenient platform for trading in currencies. 

The unique advantages of Forex trading

1.A 24-hour market

Forex trading operates on a 24/7 basis except for weekends. Trading around the world begins when the markets open in Australia on Sunday evening and close when markets end at New York Stock Exchange on Friday evening.

High liquidity

Liquidity is when you can easily change an asset into cash with minimum price fluctuations. In the forex market, transactions can easily be carried out by moving huge lots of foreign currencies in and out of the market with least price fluctuations.

3.Low transaction cost

The cost for a transaction is added with the price i.e. the buying price of the currency. This is known as a spread – the difference between the buying price and the selling price.

4.Leverage

The leveraging factor is the ability to trade more money in the market than that which is actually available on the trader’s 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 trading volume of $50,000 with just $1000 worth of capital.

In order to be able to buy and sell foreign currencies, you need to open a Forex trading account online. For every currency you buy, your account will be credited with the same amount. For every forex transaction you carry out in terms of selling, the corresponding currency will be debited from your online Forex Account. The profits you gain will be wired directly into your account through Paypal.

Profit potential from rising and falling markets

You can trade freely in the market as far as your potential goes. If you believe that the price of a currency will increase, you can buy it or go long. Increased currency price indicates you can sell it at the increased price. You can make up for huge profits by trading on volumes. However, if you believe that the currency value is going to fall, you can sell it or go short.

Seasoned stock traders can make a huge amount of profits and even become overnight millionaires. On the other hand, if you desire huge amount of profits and start trading without following the tricks of the trade you can also end up losing a lot of money. Therefore, you should always be cautious while you are operating in the Forex market or stock market.

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