The foreign exchange market is the largest capital market worldwide with a daily turnover volume of more than $3 trillion US dollars. Currency trading is thus seen by many as a viable alternative to traditional investment opportunities like the equity markets. But what exactly makes currency trading a force to reckon with in the realm of financial investments?
If you have ever traveled abroad, you know already the potential of fx trading. Your dollar will get you so much more when you exchange it to the local currency than when you use it in your home country. For that matter, if you're holding on to a large lot of a particular currency, it wouldn't be worth any value by visiting another country unless you're able to trade it for that country's currency.
Currency trading therefore enables international investments and trade. While historically the forex market was restricted to central banks, large multinational banks and major investment companies, the advances in technologies on the web helped in making forex transactions far less difficult. This factor, as well as the fact that the foreign exchange market is largely deregulated have opened up investment opportunities for smaller investment groups as well as individual traders worldwide.
Forex market characteristics. As said before the forex market is huge. It is partly because of this enormity in market size that forex is not centrally controlled in the traditional sense. Unlike the equity markets where there are stock exchanges that, in a sense, direct traffic, no such clearing structures are in place exerting control on the global forex. A forex managed account is a great investment tool if you'd like to take part in the foreign exchange market.
Because of these traits of the foreign exchange market it is relatively open to speculation and, to some extent, abuse. Currency speculators, usually from large hedge funds that have significant stakes in forex, are seen to be both a boon and a bane to the market. Retail fx trading is oftentimes blamed for money laundering activities of criminal elements.
Be that as it may, this mostly free and unregulated characteristic of the forex market has attracted many investors from all walks of life looking for better investment opportunities outside of stocks, bonds and properties. With forex, small individual investors can trade on equal footing against large banks and holding firms. This is really something very unique to the foreign exchange market.
Forex vs. other investments. Compared to the stock market and other investment instruments, fx trading allows for investments to be quite liquid, meaning capital can be taken off the market in a relatively short timeframe. For example, in spot trades are 2-day direct exchange cash transactions. However, short-term trading whether in forex or in equities is not for the uninitiated.
Investment opportunities in forex require very little capital, which is typically an advantage for novice investors. Only with fx trading can you start a forex trading account for as small as $250, for example in the case of mini accounts. This low capital requirement is afforded by leverage, that may work either for or against a forex investor. All of these aspects of the foreign exchange market as a whole make it such an interesting and dynamic investment alternative. You might also like the idea of forex auto trading service.
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