Advantages of Forex Trading
Liquidity and Volatility of the Market
The most liquid and the largest market in financial markets is forex market. The activity that occurs in one day is often more than $4 trillion USD. $1.5 trillion of that amount is conducted via spot trading. The spot trades in forex market consist of a contract, which is used to trade a certain amount of a currency with a forex market maker at a specified price to buy or sell. This price is called the spot rate. The interaction of buying or selling at a fixed price is one of the advantages of Forex trading.
Risks of Forex Trading
There is a lot of volatility in forex market. This volatility enables the trader to take advantage of the fluctuations that occur in the exchange rate for purposes of speculation. Although speculation is considered to be forbidden in such interactions it is very difficult to prove that speculation took place. If the trader is experienced in forex trading and is considered to be an expert, they should not be worried of such risks. Because even the high volatility means high risk potential, there are also many advantages of Forex trading.
Low Cost of Forex Trading
The cost in forex trading is the spread price. This is the amount that forex brokers charge and it is the difference between the ask price and the bid. Spreads that exist in the forex market are much less than other markets. The reason is, in the stock market the spread that is applied to the stocks also serves a security purpose therefore is much higher than the forex market. This makes forex trading one of the lowest costing trades in the investment world. One of the other advantages of Forex trading is that it operates 24 hours a day. Being a liquid market, forex trading has more activity than any other markets as well.