Why Trade Forex
Retail Off Exchange Foreign Currency Market (Forex) is
trading where the commodity traded, is currency.
The
return for the trader and investor is
rather the relative exchange value of one currency against
another currency.
More and more well informed traders and investors are
diversifying their traditional investment portfolios like
stocks, bonds & commodities with foreign currency because
of the following reasons:
- Market Liquidity - Because of the size
of the Foreign Exchange Market, investments are extremely
liquid. International banks are continuously
providing bid and ask offers and the high number of
transactions each day means there is always a buyer or a
seller for any currency.
- Accessibility – The market is open 24
hours a day, 5 days a week. The market opens Monday morning
Australian time and closes Friday afternoon New York time.
Trades can be done on the Internet from your home or
office.
- Open Market – Currency fluctuations
are usually caused by changes in national economies.
News about these changes is accessible to everyone at the
same time – there can be no 'insider trading' in
Forex.
- No commission – Brokers earn money by
setting a 'spread' – the difference between what a currency
can be bought at and what it can be sold at.
How does the Forex Market work?
Currencies are always traded in pairs – the US dollar
against the Japanese yen, or the English pound against the
euro. Every transaction involves selling one currency and
buying another, so if an investor believes the euro will gain
against the dollar, he will sell dollars and buy euros.
The potential for profit exists due to the large
volumes traded daily between currencies. Even small changes can
result in substantial profits or losses. At the same time,
tools exist to minimize potential losses for the individual
investor.
There are also many software facilities available to protect
both the broker and the trader or investor to minimize their
risk as much as possible.
In Volatile Market Conditions, substantial losses may
occur.
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