Forex Basics

A 24-hour market - A trader may take advantage of profitable market conditions at any time. There is no waiting for the opening bell.

High liquidity - The Forex market has an average trading volume of over $1.5 trillion per day. And is the most liquid market in the world. This means that a trader can enter or exit the market at will in almost any market condition with minimal execution risk.

Low transaction cost - The retail transaction cost (the bid/ask spread) is typically less than 0.1% (10 pips or points) under normal market conditions. At larger dealers, the spread could be 3-4 pips.

Uncorrelated to the stock market - A trade in the Forex market involves selling or buying one currency against another. There is limited correlation between the foreign currency market and the stock market. A bull market or a bear market for a currency is defined in terms of the outlook for its relative value against other currencies. If the outlook is positive, we have a bull market in which a trader profits by buying that currency against other currencies. Conversely, if the outlook is pessimistic, we have a bear market for that currency and traders may profit by selling the currency against other currencies. In either case, there is always a good trading opportunity for a trader.

Inter-bank market - The backbone of the Forex market consists of a global network of dealers. They are mainly major commercial banks that communicate and trade with one another and with their clients through electronic networks and telephones. There are no organized exchanges to serve as a central location to facilitate transactions the way the New York Stock Exchange serves the equity markets. The Forex market operates in a manner similar to the way the NASDAQ market in the United States operates; thus it is also referred to as an over the counter (OTC) market.

No one can corner the market - The Forex market is so vast and has so many participants that no single entity, not even a central bank, can control the market price for an extended period of time. As the market has grown even central bank interventions have become increasingly ineffectual and short lived as a tool for controlling the value of a particular currrency.

 

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  Forex Basics

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  Why Forex

  Advantages of the Forex Market

 

 
 

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