Last updated on May 23rd, 2024 at 11:21 am
Forex or FX, as foreign exchange is popularly known, is one of the biggest financial markets around the globe. The main purpose of this market is to earn profit through the exchange of foreign currencies.
The foreign exchange market is enormously influential, directly impacting the prices of various things across the globe with every trade. Since the last decade, forex trading and derivatives markets have expanded rapidly, making them the most important emerging market economies (EMEs).
Easy accessibility, high liquidity and international stature are some of the most prominent advantages of forex trading. Want to learn more about the benefits? Read on to learn the various benefits of trading in forex.
What is forex trading?
When an individual has to travel to some other country, he/she is required to exchange his/her currency with the one of that particular country. This job is commonly performed by traders in the foreign exchange market to earn profit. The traders buy currencies from one individual and sell them to others who require them.
This trading method has been termed forex trading. It mainly relies on the exchange trend that continuously changes. This fluctuation depends on the statistics of the demand and supply.
The foreign exchange market can easily exchange currencies anytime, as it is available 24×7. Most of the work in the foreign exchange market takes place over the counter, meaning there is no physical method of exchanging currencies. Forex trading takes place mostly between international corporations, banks, and financial agents.
Advantages of forex trading
Forex trading is an excellent way to earn more within a short span. However, high volatility of the market makes it equally vulnerable. If you wish to learn the ropes of forex trading professionally, then you can opt for a career in investment banking.
Here are a few advantages of forex trading:
1. Global exposure at a large market
Traders from every corner of the world are a part of this market. A lucrative sum of money is exchanged daily as the size of this market is huge. On average, more than USD 4 trillion is traded in this market daily. This makes it one of the largest markets with huge capital.
2. Leverage
In the forex trading market, traders can easily borrow capital from financial brokers. This is mainly because borrowers give loans against minimal capital. The leverage capital is generally written in a ratio format and traders can earn high leverage.
3. Unpredictability
The foreign exchange market is highly unpredictable or volatile as various things can easily influence it. Economic instability, geopolitical issues, trades, and catastrophes are reasons why this market is so volatile. The unpredictability of this market can either have an adverse impact or a positive impact.
If the value of a currency shows a positive shift, then traders earn a huge profit. However, if there is a negative trend, then financial traders also have to bear huge losses. Experienced traders often create strategic plans to assist them in increasing their profit margin while carefully calculating the potential risks.
4. The market is always available
The foreign exchange market is global, therefore, it is available 24×7. Trading takes place continuously, as in some parts of the world, the market is open. Thus, it is not subject to the time limits of any centralised exchange system. The market is open 5 days a week, remaining closed to retail traders over the weekend.
The foreign exchange market opens at 5 pm on Sunday in Australia. Then, it works continuously until it closes at 5 pm on Friday in the United States. Hence, the rates continue to roll and should be factored in while trading.
5. Easy accessibility for beginners
The forex trading market is suitable for beginners who want to invest small capital. They can even create demo accounts for trials before actually investing. The simulated trading environment helps beginners familiarise themselves with market movements and develop risk management strategies sans any financial commitment.
6. Liquidity
It implies how easily an asset can be bought or sold without hampering its market value. High volume and 24-hour open market system make the foreign exchange market the biggest liquid market in global trading. Exchanging major currencies comes with minimal risk, while trading in minor currencies greatly increases the potential risk.
7. Transaction charges are minimal
Transaction charges in the forex market are quite low. The only charge an individual has to pay is the broker’s fee. Therefore, minimal capital is required to trade in forex.
Conclusion
With all said and done, forex trading might seem simple but requires great insights into the market movement and strategy. It is an easy skill to learn, which can even boost your career if you wish to delve into the investment banking sector.
Imarticus Learning’s online investment banking course is a great place for professionals wishing to keep themselves in sync with the job market. It will help prospective candidates learn more about forex trading, derivatives markets and the trade life cycle. With guaranteed job interviews and live training from industry experts, the programme will help your career reach new heights.
