Forex has been gaining traction as very few markets have ever before. Brokers and banks may have been the only investors several years ago, but that is no longer the case. Hobbyists and retail investors are changing their focus on this market more and more.
According to a semi-annual survey published in 2021 by the Bank of England in April of the same year, the reported average daily foreign exchange turnover was $2.98 billion. This represented a 20% increase from April 2020 and a 16% increase from the $2.58 billion from October 2020.
Around the same time (October 2021), the Canadian Foreign Exchange Committee reported a $167.6 billion monthly turnover of forex derivatives.
So why is forex trading so enticing to beginners and experts alike? This article will analyze the seven benefits of forex trading.
No Central Regulator
Because it operates internationally as an over-the-counter market, it doesn’t rely on a central exchange or regulator. Due to the fact forex is decentralized, it protects its users from any sudden unilateral decisions that could have major consequences.
Certain countries’ central banks may interfere occasionally and only as an exception – not the rule. This lack of centralized regulation also influences the low levels of costs.
Low Costs for Transactions
The transactions also affect the low level of costs. Many forex brokers pay for all possible trade-related expenses so that you won’t be charged for withdrawals, deposits, exchanges, etc.
Brokers profit from spreads. However, before selecting a brokerage agent for your forex trading journey, be aware that some brokers may charge a commission. With some of them, this commission is flat; others choose the percentage-based commission that usually revolves around 1-2% of the managed assets.
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If you are new to forex or exchange markets in general, currency exchange is a great place to start. The terms are easy enough to understand, but more importantly, the entrance into the market has been made quite accessible. You must find reliable forex traders on Brokersview and let them do the rest.
A large amount of initial capital is not a requirement. While trading with the high margin that forex provides can present a risk, it also allows making a bigger profit with a smaller capital at your disposal.
High Liquidity Market
The term “liquidity” establishes ease for asset exchange while maintaining the same price. Given that the FX market operates around the clock and the traffic level is high, it should be no surprise that it is the most liquid market out of those currently available.
High liquidity implies low risk. However, it also indicates lower profit levels; therefore, many believe that trading currencies will not generate much income. And yet, if you select a good approach, currency exchange can be a reliable way to boost your active and passive income.
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The forex market is heavily influenced by numerous different circumstances, including but not limited to political events, climate issues, natural disasters, financial activities, and others. All of that can make the market extremely unpredictable.
You might be able to profit in these circumstances, but you should be aware of the high-risk chances. Volatility and liquidity are interlinked, meaning that the more liquid a currency is, the lower the chance it will be volatile.
So, you only need to develop the right tactic that will put you on the road to profit while helping you avoid mistakes.
Even though the forex exchange market cannot be regulated internationally, it is still done locally. Each country has independent bodies that take on this responsibility due to the matter’s complexity.
For instance, the United Kingdom has the Financial Conduct Authority (FCA). On the other hand, the US has several different regulatory bodies, depending on the asset (CFTC for commodities and futures, the US SEC for securities and commodities, etc.); South Africa has the Financial Sector Conduct Authority (FSCA), and so on.
The current major currency pairs on the forex market are EUR/USD, GBD/USD, USD/CHF, and USD/JPY. However, there are over 160 officially recognized currencies in the world. This allows you to trade with thousands of pairs according to your needs and preferences.
Forex Benefits: Conclusion
The long list of advantages has helped steadily increase forex trading‘s popularity. That, however, doesn’t mean that it is without its risks. If you are a novice, you can easily adapt to this market, even if you have no prior trading experience.
Before you step into the world of forex trading, you must research and find the right broker. Dealing with currencies is one of the best, most reliable methods to ensure your future income, even if it requires more diligence during the process.