Unlike the stock exchange market, which is harboured in a physical building, the forex market is a computer network connecting institutions, banks, forex brokers, and individual forex traders participating in the foreign exchange market. They place orders and participate in the market using a trading platform such as Meta trader 4 or simply MT4.
Trading has been known to humanity for centuries. For example, people exchanged goods for goods, and this practice was known as a barter system. Later, with the invention of money, many human populations across the world started trading goods and services for money. Now, exchanging currencies for currencies in a global market is considered forex trading.
Let’s delve into a brief history of forex trading. In 1971, the Bretton Woods Accord started to become dysfunctional. This allowed countries to exchange their currencies with other currencies. This determined the values of various global currencies based on the demand for a particular currency and its circulation in the market.
Generally, investment and commercial banks are involved in forex trading. But nowadays, many individual investors are entering the forex trading market as it is quite simple compared to the stock exchange market and provides good returns to traders with low investments.
Let’s now discuss some of the features of the Forex market.
Features of Forex Market
1. Huge Trading Volume
Forex’s trading volume is very large compared to other financial markets. According to a report from the Bank for International Settlements, the average trade volume of the forex market per day is $6.6 trillion. This shows the enormous opportunities available for traders to gain profits by investing in the forex market.
2. Continuous Market
The forex market is continuous. It operates 5.5 days every week and for 24 hours per day. The forex market operates in different cities spread across the globe from east to west.
Some famous cities for forex markets are Hong Kong, Tokyo, Frankfurt, Sydney, New York, London, etc. The market opens in Tokyo and closes in the US. The next day, it starts afresh in Tokyo.
This enables the investors to actively participate in forex trading using software such as MetaTrader 4 from the convenience of home.
3. High Liquidity Market
The foreign exchange market is highly liquid, allowing many buyers and sellers. This helps the market to remain stable as the prices can be altered only based on the actions of many sellers or buyers.
4. Low Investments
Any investor who wants to invest only a small amount can enter the forex market. This market offers high leverage for investors.
5. Advanced Signalling of Changes
Investing based on market trends can fetch profits for investors while avoiding losses. The advantage of a forex market is it reacts to the changes in the market trends much before other financial markets, helping the investors make wise investment decisions.
6. Free Practice Accounts
Forex trading platforms such as MT4 offer a free demo version to practice trading before actually investing in the forex market. This helps fresh forex traders study the market and understand the trends to invest better. These platforms are also provided by forex brokers and some forex investment training.
Investing in a forex market has huge advantages. However, the investment should be made after proper market analysis and current trends. Expert advice will always help make better decisions and earn profits from low investments. So, before you start your investment journey, ensure you have acquired enough skills to invest in the forex market.