Foreign exchange or currency trading is a global market that is incredibly liquid along with a daily trading volume. As is the case with a lot of investments that forex trading is not for the faint of heart or the inexperienced trader. It is fascinating to know that some technical analysis in forex trading allows you to get significant perks. Let’s have a look at some surprising facts regarding forex trading.
- 24-Hour Market for Five Days
The forex market is worldwide that means forex trading is much continuous as long as there is an open market in the world. Keep in consideration that trading hours start in U.S. when the major market opens, in Sydney at 5 p.m. However, Eastern time on Sunday and trading ends for the week when the last major market. In New York it closes on Friday at 5 p.m.
- High Liquidity
Liquidity is known as the ability of an asset to be quickly converted into cash. In the world of forex, keep in consideration that the high liquidity means large amounts of money can be moved into as well as out of currencies with small spreads.
- Low Transaction Costs
The cost of a transaction is built into the price in the forex market in the form of the spread. Bear in mind that the forex brokers pocket the spread as their payment for facilitating the trade. However, the spreads are measured in pips. A pip is the fourth place after the decimal point as well as 1/100 of a percent for most currencies.
Brokers can also charge a commission, no matter it is a flat fee or one based on a percentage of the amount of the transaction.
- Nobody Owns the Market
Given the sheer size of the forex market, no single institutional trader can control market prices for an extended time period. The reason is that, the market quickly calibrates itself and levels the playing field. Along with this, the forex market is decentralized and there are no middlemen. You are allowed to trade directly with another participant in the market. A retail forex broker facilitates this connection. the market is significantly influenced by the economy itself, not one person or a company. No one can control it, and that means that you not as small a fish as you may think.
- Use Leverage
Forex brokers allow traders to buy and sell in the market using leverage that gives them the great ability to trade with higher amounts of money. it means that if you were to trade at 50:1 leverage, you could trade $50 for every $1 that was in your account.
A small deposit can go a long way with the help of leverage. You can borrow money from your broker for trading with in excess of actual deposited funds. We can also say that leverage is one of the powerful tools of forex trading.
- Profit Potential from Rising and Falling Prices
It is fascinating to know that the forex market has no restrictions on directional trading that means if you are thinking a currency pair is increasing, you can buy it. If you think it is going to decrease in value, there are several strategies by which you can sell it.
- Risk-free Demo Account
You are allowed to make use of a free forex demo account in order to practice forex trading and learn the ropes. Trading with a demo account is like the real thing. However, you are doing it with play money. keep in consideration that a demo account is considered great for those who want to test the waters and improve their trading skills in market conditions without any risk of actual capital.
- No Commissions on Most Accounts
There are no trade commissions as well as very low ones for large volume trades. There are no clearing or exchange fees. It is essential to know that most of the retail brokers earn their revenue through the spread that tend to be very tight by making forex trading one of the most cost-effective investment tools.
Highly capitalized brokers offer very competitive spreads that are responsible to minimize your trading costs as well as maximizing your profits.