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Why should You Start Forex Trading

    IndianMoney.com Research Team | Thursday, August 06,2009, 07:26 PM
 

Forex trading is the buying and selling of currency. Currencies are traded through an agent or dealer and are traded in pairs. Euro, US dollar, British pound, Japanese Yen are some of the currencies traded in the Forex Market. You are not buying anything physical in Forex market. Currency trading works similar to the stock market. Think of buying a currency as buying a share of a particular country. When you purchase say Japanese Yen, you are in effect buying a share in the Japanese financial system, as the price of the currency is a direct reflection of what the market thinks about the current and future health of the Japanese economy. In common, the exchange rate of a currency versus other currencies is a reflection of the condition of that country's financial system compared to the other countries financial system. Unlike other financial markets like the New York Stock Exchange, the Forex spot market has neither a physical location nor a central exchange. The Forex market is measured an Over-the-Counter (OTC) or Interbank market, due to the fact that the entire market is run electronically within a network of banks continuously over a 24-hour period.

Until the late 1990's only the big guys could play this game. The first requirement was that you could trade only if you had about ten to fifty million bucks to start with Forex. Forex was initially intended to be used by bankers and large institutions and not by small guys. However because of the rise of the Internet, online Forex trading firms are now able to offer trading accounts to 'retail' traders. All you need to get started is a computer, a high-speed Internet connection, and the information.

The Most Common Currencies Traded in the Forex Market

The most popular currencies along with their symbols are shown below :

Country

Currency

Symbol

Nick Name

United states

Dollar

USD

Buck

Euro member

Euro

EUR

Fiber

Japan

Yen

JPY

Yen

Great Britain

Pound

GBP

Cable

Switzerland

Franc

CHF

Swissy

Canada Dollar

Dollar

CAD

Loonie

Australia

Dollar

AUD

Aussie

New Zealand

Dollar

NZD

Kiwi

Forex currency symbols are always three letters where the first two letters identify the name of the country and the third letter identifies the name of that country’s currency

Market size and liquidity

The foreign exchange market is exclusive because of the following reasons;

  • Its trading volumes
  • The tremendous liquidity of the market
  • Its geographical dispersion
  • Its long trading hours
  • The variety of factors that affect exchange rates.
  • The low limits of profit compared with other markets of fixed income but profits can be high due to very great trading volumes
  • The use of leverage

Why should you start Forex Trading

Below given are some of the reasons, which make Forex trading an attractive investment;

  • The markets are open 24 hours a day
  • Largest and most lucrative market in the world
  • Limited Capital requirement
  • Infrastructure is not a constraint
  • No need to depend on Staffs
  • No Physical stock
  • Free from Theft and Depreciation
  • High Liquidity
  • It is a Paperless Business

The markets are open 24 hours a day


Time is not a barrier in Forex market because it will be opened 24 hours a day. This gives the trader an opportunity to trade at any time around the world. This allows you to respond to favourable/unfavourable happenings in the market by trading immediately. From any part of the world you can trade in Forex Market.

Largest and most lucrative market in the world


Forex market is the largest market in the world. If you put together the volume on all the stock exchanges in the world, it would still not get close to the volume on the Forex markets. Volume make sure that a trader will never be stuck in the market, if you want to buy there will be sellers and if you want to sell there will be buyers.

Limited Capital requirement


Most of the business needs huge capital to start its operation. But Forex market gives you an opportunity to make money with a limited capital. It doesn’t need extra money to grow your investment. You just grow your investment or new plans by locking in profits from your forex trading account.

Infrastructure is not a constraint


To trade in Forex market you only need a computer with a proper in addition the necessary training to conduct your business. No offices and other expensive infrastructure is required to do this.

No need to depend on Staffs


Forex Trading can be done with only you and your computer and you have no staff or labour problems, no salaries and wages, to be worried about.

No Physical Stock involved


No business can operate without stock be it production or even stationery stock, this in itself is a huge expense to keep and protect but Forex trading is 100% online trading so no need of worrying about physical stock or something.

Free from Theft and Depreciation


Unlike other investments (Gold, Silver) there is nothing to worry about theft or physical depreciation.

High Liquidity


Because of the huge volume and large number of traders involved forex market will always have a buyer when you want to sell your currency. You will never face a liquidity problem. Whenever you want to sell the currency, without much effort you can do it.

It is a Paperless Business


All transactions will be done through your computer with the help of trading software. You can see your trading account while locking in profits during your trade. There no paper work included in this as everything in done online.

IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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