What is Forex and Forex trading?


The foreign exchange market (forex or FX for short) is one of the most exciting, fast-paced markets around. Forex trading in the currency market had been the domain of large financial institutions, corporations, central banks, hedge funds, and extremely wealthy individuals. The emergence of the internet has changed all of this, and now it is possible for average investors to buy and sell currencies easily with the click of a mouse through online brokerage accounts. In simple words, the Currency of one country is exchanged for the currency of another country.

What is trading?

A trader is a person or entity, in finance, which buys and sells financial instruments such as stocks, bonds, commodities, derivatives, and mutual funds in the capacity of agent, hedger, arbitrageur, or speculator.

What is Online Trading?

An electronic trading platform, also known as an online trading platform, is a website or computer program with a graphical user interface used to trade financial assets via electronic communication.

Types of Online Trading

Investors have a wide range of trading options to choose from. Some prefer short term trading options, while others prefer to play the waiting game and make larger profits by undertaking long term trading strategies.

Advantages of Forex Trading

  1. Most Liquid Market in the world
  2. No Insider Trading and is more Transparent
  3. 24 Hours Market
  4. Decentralized Market
  5. No Middleman involved
  6. No fixed Lot Size
  7. Leverage
  8. Minimal or Low Commission
  9. Low Transaction Costs
  10. Free Educational Materials
  11. No Price Manipulation
  12. No-Gap Openings
  13. Can hold Positions both Short and Long at the Same Time
  14. Works more technically than the Stocks and Commodity Market

Outline of Forex

The forex market represents the electronic over-the-counter markets where currencies are traded worldwide 24 hours a day, five and a half days a week. Governments, central banks, banks, and other financial institutions, hedgers, and speculators are the main players in the forex market.

Day Turnover

According to the Bank for International Settlements, the preliminary global results from the 2016 Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Markets Activity show that trading in foreign exchange markets averaged $7 trillion per day. This shows that the market size for FX is huge due to its transactions compares to any other (Stocks, debentures, commodities, etc.).

You can opt FX for multiple reasons, cause of its viability namely,

a. Market size
b. Market Timing
c. Low Transaction cost
d. Leverage
e. Minimum or No Commission
f. Instant Execution
g. Spread
h. Gap Openings
i. No Market Manipulation

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A.Sulthan, Ph.D.,
Author and Assistant Professor in Finance, Ardent fan of Arsenal FC. Always believe "The only good is knowledge and the only evil is ignorance - Socrates"
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