Foreign exchange market or the Forex market is the market where the currencies of different countries are bought and sold. Now, the Forex market is the largest traded financial market in the world. Price of a currency in the market is determined by the interaction between the demand for and the supply of that currency. There are two types of exchange rate systems in the world – fixed exchange rate system and flexible exchange rate system. In the fixed exchange rate system, price of a particular currency is kept fixed vis-a-vis other currencies. Whereas, in case of flexible exchange rate system, price of a currency varies with the change in the demand supply conditions in the market. Before 1970s, there was fixed exchange rate system throughout the world. In case of fixed exchange rate system, there was no chance of Forex trading. However, after 1970s, flexible exchange rate system has been introduced and this opened up the opportunities for Forex trading. Through buying a currency at a lower price and by selling it at a higher price, you can make profit. In more recent times, introduction of Internet has given a tremendous boost in Forex trading business. However, here we discuss about the major benefits of Forex trading.
Market operates on 24/7 basis
The most important feature of Forex trading is that you can take part in trading in this market on 24/7 basis. You do not have to wait for the market to open. You can join the market trading at any time which is convenient for you.
Market is highly liquid
Another important feature of this market is that the market is highly liquid. In other words, you can cash in and cash out of the market at any point of time, according to your wish. Currently, Forex market is the largest trading market in the world. If you trade with major currencies of the world, you would not have to worry about liquidity issue.
High leverage ratio
One of the major hallmarks of the foreign exchange market is the high leverage ratio. Say the leverage ratio is 10:1. It implies that if you invest $500, your effective investment amount becomes $5000. This type of leverage allows you to maximize your profit potential but at the same time chances3of losses are also quite high. However, option is there to choose the leverage ratio at which you are most comfortable with.
The above mentioned advantages associated with Forex market have increased its appeal and attractiveness among the investors.
