The Foreign Exchange Market, known as the Forex Market for short, has the largest daily trading volume of all the financial markets. In April 2019, as reported by the Bank of International Settlement (BIS), it reached a daily turnover of $6.6 trillion up from $5.1 trillion three years earlier. Surveys from the same bank have continued to indicate that this financial market has been consistently growing.
Introducing the Forex Market
As a result, it is no wonder that it continues to attract interest from the general public. In fact, while many of its new recruits are trading amateurs, well-established traders of other financial instruments are also turning to the Forex market for many reasons – some in search of new excitement, some for new challenges, but many more for better profitability.
However, whether you are an amateur or an expert, before you rush and open an account in order to take your first Forex trade, there are some important characteristics about the market you should know.
Huge Market Size
The size of the Forex market is just immense. With a daily trading volume of $6.6 trillion, it is, indeed, ginormous. The largest stock market in the world, the New York Stock Exchange (NYSE) clears far less in a day. This ginormous size of the Forex market also means that it is ever liquid. That is, participants in it can buy and sell currencies with ease.
The Forex market is also completely decentralised, meaning that it does not have a central exchange and all trades are only electronically executed. Because of this and its large size, the market cannot be manipulated by anyone. Hence, you can always be sure that you will be getting, to a very large extent, fair deals in it.
Low Entry Barriers
Of all financial markets, Forex has the lowest entry requirements. Legally, you need at least $25,000 to trade stocks daily in the United States. Conversely, you can start trading Forex with $500. In fact, there are Forex brokers that require just $10 from you to open an account. Of course, we do not advise you start with that small. But you can get the picture that we are trying to paint.
In short, you do not have to be rich to trade Forex. Yet, by trading Forex, you can become financially free. After depositing the little you have in required minimum, you can then use verified Forex signals to shore up your account before you start trading by yourself.
There are two types of tax you can pay on your financial market investments. They are short-term capital gains tax and long-term capital gains tax. You pay the first if you take your profits within a year and the latter if you do after more than a year. Interestingly, for Forex traders, it does not matter whether they take their profits now or later, only 40% of their profits are taxed as short-term capital gains.
There is arguably no other financial market that is as tax-efficient as the Forex market. The profits taken on a stock market trade entered and exited within six months is taxed as short-term capital gains, which will be higher than if it was a Forex trade. Hence, with Forex, you also get to have a tax advantage.
Almost Unlimited Trading Hours
The Forex Market has almost unlimited trading hours. It is open 24 hours a day and also for almost 6 days a week. It is open from 5 p.m. EST on Sunday to 4 p.m. EST on Friday. This 24-hour trading ability of the market ensures that traders from different parts and zones of the world, from Australia and Asia to Europe and North America, can participate in it.
Moreover, the many trading hours of the Forex market ensure that it is open to almost everyone irrespective of what they do. Are you a homemaker? You can trade in the Forex market when you are free. Are you a student? The Forex market has got hours that will work for you. Even if you are either retired or you are holding a day-time job, you can still get to trade Forex.
Because of the same reason, the market is compatible with many strategies. Whether you are a scalper, a day trader, or a long-term investor, you can always find entry and exit points.
Leverage is an arrangement that allows a trader to control large positions with just fractions of their worth. When a trader uses leverage, he is said to be trading on margin. Margin is the fraction of the actual worth of a position that a trader has to put up before he will be able to enter and maintain it. Of some sort, leveraged trading is like trading with borrowed money.
And there is an abundance of it in the Forex market. In fact, it is not uncommon for retail Forex brokers to offer as high as 1:1000 in leverage. While such high leverage is not advised as it can turn against traders to result in massive losses, it actually demonstrates how a provision that can help to magnify profits is so easily available to them. Leverage of just 1:100 is, however, considered as the ideal leverage recommended for Forex traders to use.
The Forex market also has a high-profit potential because no matter the direction it is headed, whether it is going up or down, you can always get to make a killing in it.
The Forex market has notable, endearing features. With as little as $500, you can start trading in it right away. Because of its immense size, trades can be entered and exited with ease. The trading hours are almost unending, with high-profit potential. In fact, as a trader, there is no better place to be than it!
However, it can also be challenging. 90% of all its participants lose and quit. For that reason, you use a signal service to boost your chances for success. 1000pip Builder is there to help and you can check them out here.