Forex, or FX, is an abbreviation for foreign exchange. It is the act of exchanging one currency for another. This exchange rate is the basis of forex trading, and the differential between the two exchange rates provides opportunities to buy or sell the pair. You can take a position in expectation of the exchange rate increasing or decreasing.
The forex market has unique characteristics and properties that make it an attractive market for investors who want to optimize their profits.
The forex market has enticed retail currency traders from all over the world because of its benefits. One of the benefits of trading currencies is its massive trading volume, which covers the largest asset class globally.
This means that currency traders are provided with high liquidity.
The leverage given in the forex market is one of the highest forms of leverage that traders and investors can use. Simply put, leverage is a loan given to an investor by his broker.
With this loan, investors are able to enhance profits and gains by increasing traders’ and investors’ control over the currencies they are trading.
In 2013, the Triennial Central Bank Survey of Foreign exchange and OTC Derivatives Market Activity provided statistics on the amount of currencies traded daily, and has stated an average of $4 trillion traded daily.
The break-down of this amount shows that $1.490 trillion were traded in spot transactions, $475 billion in outright forwards, $1.765 trillion in foreign exchange swaps, $43 billion in currency swaps, and $207 billion in options and other forex products.
In the forex market, as one major forex market closes, one in another part of the world opens. Unlike stocks, the forex market operates 24 hours daily except on weekends.
Traders find this as one of the most compelling reasons to choose forex, since it provides convenient opportunities for those who are in school or work during regular work days and hours.