10 amazing facts about the Forex market that YOU should know now!
How BIG is the Forex Market?
Can I really make money trading currencies?
What are some of the advantages of trading Forex?
These are some of the burning questions almost all traders ask.
In this post, I've condensed all these burning questions into a "Fact Finding List." Here are the TOP 10 facts you must know when you trade Forex. Enjoy!
Forex is the largest financial market in the world, trading at a staggering 5.1 trillion US dollars in a single day. Because of its huge size and liquidity, there is always a ready buyer and a ready seller to transact anytime, anywhere.
2) 24 Hour Market
Forex is a truly global market that trades 24 hours a day, 5 days a week. This makes it possible for you to set your own trading hours. Most activity takes place between the time the New Zealand market opens on Monday, until the US market closes on Friday evening. In the GMT+8 time zone like Singapore, Malaysia and Shanghai, this means that the Forex Market is open from 5am on Monday to 5am on Saturday every week without fail.
3) Small Transaction Cost
There are no commissions charged in Forex, only a small transaction fee called a spread. This is not possible in any other market, as brokers charge a commission on each trade in all other markets. The spread in a Forex trade is typically less than 0.01% of your account size.
4) Free Accounts and Tools
Most online Forex brokers offer free demo accounts along with breaking Forex news and charting services. A demo account means two things: Firstly, it is virtual money. Secondly but more importantly, it displays LIVE prices. These are very valuable resources for traders who would like to hone their trading skills with virtual money before opening a live trading account.
5) Profit Both Ways
Profit potential exists in Forex regardless of whether a trader is buying or selling and regardless of whether the market is moving up or down. This can happen because a Forex trade involves the buying of one currency and selling of another simultaneously; essentially trading in currency pairs. Examples include EUR/USD, USD/JPY, AUD/USD and NZD/USD. This unique setup allows a trader to buy and sell anytime, thereby presenting an opportunity to make money anytime. In essence, this is truly a "recession-proof" vehicle.
6) High Leverage
Brokers provide unparalleled levels of leverage in Forex. This can go as high as 400 times the trader's investment. For example, a leverage of 500:1 would allow an investment of USD1000 to control up to USD500,000 worth of currencies. Leverage gives the trader the potential to rapidly increase the size of his account while keeping risk to a minimum.
7) Online Access
With the advance of technology and the Internet, all a person needs to get started trading in Forex is two things:
1) A laptop or a mobile device
2) An internet connection
With cheaper and readily available internet access all over the world, trading the Forex market has truly become easier and more robust to every person wanting to embark on a financially rewarding journey.
8) Low Account Minimum
Individuals can open a live trading account with as little as USD200. Budding traders have the choice to start small and grow the size of their account rapidly through the power of compound interest. This allows the trader to learn real lessons on the Forex market without risking high capital.
9) Limited Government Regulation
There is virtually no government weight in the Forex market because Forex is considered an OTC market - an "over-the-counter" market. This means that there is no central exchange or location for traders to meet. Forex transcends all cultures and national boundaries because it is basically traded on the internet.
10) Equal Access to Market Information
Despite the introduction of best execution regulations in Europe and the US, many people would agree that professional traders and analysts in the equity market have a huge competitive advantage in comparison to individual traders. In Forex however, perhaps the only advantage the big banks have is flow information. Other than that, Forex is a democratic market where virtually all participants have access to the same market moving information as everyone else. The arena now becomes a level-playing field because retail traders have almost all the same tools and information as the institutional traders.
Head of Research and Education
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