01 Mar What Makes the Forex Market So Appealing?
Ask any experienced forex trader about what makes this market so great, and you’re sure to get an enthusiastic response. For a beginner or someone still deciding whether forex trading is right for them, this enthusiasm is equally catching and puzzling. What, exactly, makes the forex market so appealing? Why choose to trade currencies instead of, say, stocks?
Good question! Here are the most common answers. (Already a seasoned forex trader? Leave your own response in the comments below.)
The Forex Market Has the Greatest Liquidity of All Markets
On any given day, there is a high volume of transactions taking place on the foreign exchange market. It’s a truly international market, attracting large amounts of traders and maintaining that steady volume of transactions. You can trade with the most popular currencies to make transactions in record time, and it’s easy to enter or exit a trading position without needing a large amount of cash to do so.
Forex Trading Happens 24 Hours a Day
The stock market, for example, is open for trades only during set business hours, but forex trading is a global enterprise. The trading day begins in Australia and ends in New York, but it never truly shuts down. As Brent Eaton from Learn to Trade explains, the U.S., European and Australian markets have peak hours at different times, which may affect when you wish to trade, but nonetheless, there will always be an opportunity to make a transaction. This means you can work a day job and
This means you can work a day job and be a forex trader during your free time to earn some extra income. It isn’t practical to do the same with the stock market.
Forex Trading Requires a “Big Picture” Understanding of Economics
There’s no need to get into the nitty-gritty details of microeconomics in order to be a successful forex trader, although if that interests you, you can certainly research micro-economies to help inform your trading efforts. But the bread and butter of the forex market are global economics. What is happening on a large scale? Which countries have flourishing economies? Which
Which countries and currencies may be struggling or threatened by political maneuvers? These are the main questions you need to consider, not whether a company will turn a profit this year or whether you should be investing in the competition. Researching companies for the stock market reveals a host of variables. In comparison, the forex market is much more straight forward.
Leveraged Trading Is Easy on the Forex Market
It’s possible to deposit only a small amount of money into your forex account and yet trade large amounts of currency. In fact, the forex market has the largest leverages of any market. Whereas you may need thousands of dollars upfront in order to begin trading on the stock market, trading on the forex market is possible with smaller initial investments.
Your broker will fund the interim cost. Speaking of brokers, leveraged trading is so advantageous on the forex market that brokers will readily compete for your business as a trader, offering leverage ratios of 50:1, 100:1 or even 200:1 in order to get you to use their platforms. Again, the goal is to make it possible for you to trade large amounts of currency with fewer up-front expenses.
A Bull Market Is a Given
A bull market, or a rising market, is always a given in the world of forex. Forex trading pits two currency pairs against each other. One of the currencies will always be worth more than the other. Your goal is to back the currency that will be worth more and therefore give you the most profit. If one currency falls, by default the other currency will represent a bull market. In other words, there is always an opportunity to be on the winning side; you just have to have enough foresight to predict when these changes are likely to occur. That is the crux of all successful forex trading.
Most people think about the stock market when they think of trades and investments, and the stock market is a confusing and somewhat exclusionary beast. The forex market, by contrast, is far more appealing to casual and full-time traders alike. What draws you to the forex market? Let us know your perspective in the comments below.