The Foreign Exchange Market, which is also called the FX, or the currency market, or as forex, is an over-the-counter (OTC) world market that decides and regulates the exchange rate for world currencies. Participants of this market can buy, sell, speculate, and exchange on the relative exchange rates belonging to various currency pairs, like INR/USD, INR/GBP, EUR/USD, etc.

The foreign exchange market constitutes forex dealers, banks, central banks, commercial companies, hedge funds, retail forex dealers, investors, and investment management firms. As mentioned above, currencies are always traded in pairs. In a pair, the value of one of the currencies is relative to the value of the other currency.

This feature of the forex market distinguishes it from the contemporary market types. Also, the benefits and flexibility that a participant would find here will not be absent in any other markets. Hence, let’s check what benefits make the foreign exchange market so popular.

Significant Benefits of Foreign Exchange Market

1. Liquid Investment:

Foreign exchange markets are highly liquidating, which means an investor who does forex trading can liquidate his investments at any point in time and withdraw his money from the market. With fear rules governing this market, Investors are left loose from abiding by the strict regulations and standards found in other markets. There are even no central bodies or clearinghouses to oversee the forex market.

2. Recession Resistant:

A key advantage to foreign exchange traders in the forex market is that they trade without any fear of recession compared to stock markets. A recession is a common scenario when prices of stocks and shares start falling. Recessions do not arise in the forex market because the dollar currency at all times is traded for or against other currencies in forex.

3. Convenience:

Trading in the foreign exchange market is highly convenient because the market is open for 24 hours, allowing the traders to trade at any hour in a day. Forex traders across the globe are brought together into contact five days a week through the internet.

This way, the need for cut-off time to participate in the market is eliminated. Traders are also allowed to enter or leave the forex market per their wish and buy as much currency as they want depending on your bank account balance with which you are trading and your broker’s terms & conditions for leverage.

4. Leverage:

Forex market ranks as one of the highest providers of leverage to its investors and traders. By leverage, we mean a loan that a broker extends to his investor. Using this loan, investors will be able to increase theory trading size, resulting in increased profits.

Although, the chances of losses equally increase. For instance, an investor with a $1,000 foreign exchange market account can trade up to $100,000 worth of currency, keeping a margin of 1%. This infers a 100:1 leverage. Based on the $100,000 notional amount, the investors will be earning a profit or loss.

5. Trading Options:

In the foreign exchange market, traders can trade with a broad spectrum of trading options. They can trade in hundreds of currency pairs. Traders can also choose between trading via spot trade or through a future agreement.

To meet the needs of forex traders, the future agreement consists of multiple sizes and different maturities. Therefore, the foreign exchange market has trading options for every budget type and every kind of investor with another risk appetite.

6. Flexibility & Transparency:

A lot of flexibility is offered to the traders in the forex market because there is no restriction on the amount of money that traders can use for trading purposes. Along with this, the forex market has zero restrictions and is open 24 hours for trading.

This market is also suitable for those who have a full-time job as they can devote a small amount of time during the nights. However, when one primary forex market closes, another one in some other part of the world is working, which increases the liquidity available in the currency market.

Seeing that, the forex market is seen as the most significant asset class available to investors.

The foreign exchange market is vast in size and functions across several time zones. That is why it is not possible for a Central Bank or any country to corner the forex market single-handedly or rig the prices of the currencies for an extended period.

7. Transactional Costs:

Unlike other markets, the forex market does not charge any commissions or the standard fees from most of its investors. And, those charged with the fees are required to pay low transactional fees. On a percentage point basis, Forex transaction costs are meager compared to other markets. Low transaction costs primarily are because the market is operated mainly by traders who offer a bilateral price quote after setting aside a percentage that shall protect them from the risks. A brokerage called pure play is also relatively low in the forex exchange market.

A Few Last Words

The foreign exchange market is vast, with lots of options to trade and something for every investor. It is highly flexible and convenient that any working professional would also invest a moderate amount of his time trading.

All you need is a decent amount of money to invest and an excellent strategy to make a wise investment. So, first, plan a design and then enter the foreign exchange market, or else your investment value would be equal to the Lowest Value Of Paper Money Without The Portrait Of A U.S. President.

Author:

Kacee Christian is a freelance content writer and enthusiastic blogger. She is the co-founder of Thesportsmag. She contributes to many authority blogs such as Toppreference.