Forex trading is the one of the most lucrative instruments in the financial markets. The currency market is a global, decentralized, over-the-counter market for trading currencies, making it the largest financial market as well. The flexibility of the market’s operational hours and the volatility of financial markets also present several advantages for the players. The total forex trading volume or market liquidity exceeds by threefold the combined total of the futures and stock markets.
Before the 1970s, retail investors could only access the foreign exchange market through banks that dealt in large volumes of currencies for investment and commercial purposes. After the liberalization of exchange rates, total forex trading volumes increased tremendously. Nowadays, exporters, importers, multinational corporations, international portfolio managers, long-term holders, hedge funds, speculators and even day traders started to use the forex markets to par for services and goods, trade in financial assets, or minimize the risk of currency fluctuations by hedging against exposure to other markets.
Large Dynamic Market
Forex trading lacks a central market place for currency exchange these days, and trade is often conducted over-the-counter. The market is open 24 hours per day, every business day of the week, and currencies are exchanged across the world’s major financial centers. This means that you can trade any time of the day as long as it’s a week day.
Besides being the largest market in the financial markets, forex trading is also the most liquid. Daily activity normally exceeds $4 trillion USD per day, with approximately one third of that constituting spot trading. The immense total trading volumes and the constant existence of market volatility in the forex markets enables traders to exploit the benefits of fluctuations in exchange rates across different markets for speculative purposes.
The internet has further revolutionized how forex trading is conducted and helped investors to exploit the power of the total forex trading volumes in the currency markets. The internet has also enabled more convenient and efficient 24 hour total forex trading, which allows investors to take advantage of volumes and the high liquidity experienced in the market due to the overlap of operational hours in different time zones.