A lot of individuals tend to get confused about the aspect of trading in Forex either because they are not aware of the market or believe it to be a waste of investment. Regardless of all that, we are here to clarify certain things and spin the wheel in the right manner. Trading in Forex is indeed a good idea, and we have specific points to support our claim. So if you wish to know why, then go ahead and read them out.
1. High Liquidity
When you compare the Forex market with another financial market in the world, you will find one particular feature to be lacking on other platforms, i.e. liquidity. As the market has a vast number of participants, it enjoys a considerable level of liquidity that, in turn, enables large orders of currency trades to quickly and effectively function. So the possibility of price manipulation and anomalies, tend to get eliminated and remain outside the picture. Even during the opening and closing hours of the market, liquidity tends to be a part of the process.
2. Minimum Costs/Capital
Due to the lack of commission or brokerage, Forex market helps you with the aspect of minimum or low costs. As most Forex brokers make profits through spreads, the need to gain money through commission goes out of the way. This is a unique feature that is most certainly found only in the Forex market. Various other financial markets like the Stock market tend to involve commission and brokers always make it a point to take their share. Apart from that, the need for capital also remains to be low, thanks to tight spreads that come in terms of pips. As a result, one can easily start trading in Forex with a small amount as initial capital.
3. Decentralized Market
Trading in the Forex market is carried on the basis of over-the-counter exchanges, and thus, there is no regulator or a central form of exchange. Although Central banks try to interfere with the same, it still stands to be a rare phenomenon as their policies come in only during extreme conditions. As a result, every investor enjoys freedom to a large extent and is free to make decisions on their own.
4. Volatility and Variety
Major currencies in the Forex market display high price swings, and thus volatility tends to follow through the means of profit-making. On the other hand, the concept of variety holds a form ground with over 28 currencies being involved in the activities of trade. With the right kind of combination between volatility and variety, Forex traders can easily switch from one currency pair to another.