The foundation of currency trading which we know today came about following the end of fixed currency exchanges to new “floating’ currency rates in the early 1970’s. The market has managed to stay stable since this time, with interest fueled by advances in technology such as computers and telephone dealings. Because of these, more people have become more attracted to entering the Forex market.
Foreign exchange is not a central market but one that consists of a network of several thousand trading institutions around the world. These are made up of Central Government banks, Interbank, commercial and private banks. And while Forex has no physical marketplace, it has key trading centers in New York, Tokyo, London, Hong Kong, Frankfurt and Singapore.
Forex trading used to be feasible to the affluent and elite class only. But since the advent of the Internet and other technological advances, this has also become accessible to investors with smaller capitals. A number of Forex brokers today have made it more possible for small investors to trade currencies by offering small lot sizes.
Investors around the world have turned to Forex since the decline of the real estate market and equities. This trend in the past decade, along with the competition has significantly brought down the cost of trading.
So why have many investors begun to trade currencies and what are its key benefits? Below are just some of the most common advantages of currency trading over other investments.
1. High Liquidity –
Unlike stocks, currency trading is highly liquid with its $4 trillion dollar trade a day. The high volume of transactions on the market around the clock means that there will always be a buyer and seller for any given currency so getting your order filled will not be a problem regardless of where you live and what time you want to trade.
2. Accessibility –
As mentioned, many Forex brokers today offer small accounts to accommodate smaller investors. You can start in Forex trading for as little as $100 (not recommendable though). Additionally, trades can be executed in just a matter of seconds via any computer that has internet connection.
3. Market Transparency –
Market transparency in currency trading is greater than in stocks or commodities, therefore making it easier to evaluate the inner workings of the Forex market and find out the elements that drive it. News and economic reports for example are widely accessible to anyone interested while in stocks – the individual company’s accounting states are a lot more difficult if not impossible to get hold of.
There is a vast amount of resources covering Forex trading in print and online. So if you’re interested in leaping into currency trading, make sure to take advantage of these and learn from experienced traders to help develop your knowledge and experience in Forex trading.