One of the more exciting investment opportunities for individuals today is in forex, or the foreign exchange market. This involves trading currencies with the goal of making a profit when one currency gains relative strength over the other.

The United States dollar was involved in 87.7 percent of all forex trades in 2013, making it one of the most popular currencies, with the euro in second place. The size, liquidity and access to the forex market are three of its most popular attributes. While there is little in the way of regulation, the amount of information out there that is available to potential traders is greater than the information available to some of the other trading vehicles, and the field is the same for an individual trader as it is for a large corporation. Learning more about the forex market is an important step in diversifying your expertise as an investor.

The sheer size of the forex market is one reason for its vast liquidity. In April 2013, the activity in foreign exchange markets averaged $5.3 trillion each day—almost double the $3.3-trillion daily activity in April 2007. In addition to the considerable size, is the market’s liquidity—it is the most liquid financial market in the world. There are many different types of traders, on two different types of accounts. There are the "interbank" trades that involve immense amounts of currency and take place between major financial institutions. The rest of the traders, ranging from individuals to brokerages, use "margin" accounts. The average daily turnover in April 2010 was $3.98 trillion, more than twice the $1.7-trillion average in 1998.

The forex market averages roughly $5.3 trillion each day, making it the most liquid market in the world. This allows general trading costs to be lower and spreads to be tighter in comparison to other financial markets.

Another advantage of foreign exchange market trading is that it takes place around the clock on weekdays. From 22:00 GMT on Sunday (Sydney) until 22:00 GMT on Friday (New York), the forex market remains open. This sets it apart from the other financial markets, which open and close according to the business hours of the country in which the market exists. This is what makes the European markets occasionally so volatile; they are opening just as the Asian markets are closing for the day, but the American markets won't open until the European ones have almost closed. No matter where you’re located, though, no matter what time it is during the week, you can take advantage of a currency position that you believe will be favorable to you.

The forex market is open 24 hours a day, Monday through Friday (re-opens Sunday evening).

One reason why forex trading is attractive to investors is the considerable access one can have to information and education about the whole process in this market. Most brokers allow you to set up a demo account using fictitious money while you learn how the trading process works. With Tradingfo´s Learning Center, you can educate yourself on the short- and long-term trends for different currencies so that you can better know what you're doing before you start spending your own money. This combination of access to tutorials and financial information can help to provide the leg up you need to set up a forex account.

Access to education and information has been key in introducing retail traders and investors to the forex markets.

Another attractive feature about forex trading is the considerable amount of leverage involved. This refers to a technique that you might use to multiply your gains and losses. Much of the time, this involves using borrowed money to buy more of a particular asset because you believe that the money you will make will pay for the cost of the credit, and then some. A lot of brokers will offer investors 100:1 leverage. This means that if you have $1,000 to use, you can run trades for $100,000, although you do assume responsibility for any losses that occur as a result. This high level of leverage brings a significant possibility for rewards—as well as for high risk (with the possibility of losing more than your initial deposit). Individual traders are moving on the same trading floor as brokerages and smaller banks in the forex market, making the market one of the most democratic trading markets out there. There are other investment vehicles that exist, but few of them offer the equitable nature of the forex market.

The forex market offers high amounts of leverage, which allows you to open larger trading positions with a smaller amount of capital.

Bottom Line

If you’re new to financial trading, then forex trading can be an exciting place to begin. There are a number of reasons as to why forex has become the largest and recently most popular market to trade. This market has become accessible for different types of traders, making it a level playing field for all of its participants.

Summary:

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The size, liquidity and access to the forex market are three of its most popular attributes.

 

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The forex market averages roughly $5.3 trillion each day, making it the most liquid market in the world. This allows general trading costs to be lower and spreads to be tighter in comparison to other financial markets.

 

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The forex market is open 24 hours a day, Monday through Friday (re-opens Sunday evening).

 

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Access to education and information has been key in introducing retail traders and investors to the forex markets.

 

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The forex market offers high amounts of leverage, which allows you to open larger trading positions with a smaller amount of capital.

 

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