If you have heard about forex trading and have been interested to learn more about why it is so popular, you will want to read this article. We will explain the key advantages of trading forex, including the fact that it offers high liquidity trading opportunities 24 hours a day where you can profit if the market is rising or falling, where trades are commission free and streaming prices, news and charts are also provided free. After you read this article, you will understand five reasons why forex trading is popular.
First we need to explain just what forex trading involves. Forex is short for foreign exchange. It is also known as FX. It means changing one currency for another. Buying one currency and selling the other at the same time. Why would we want to do this and how can we profit? By buying one currency and selling another, we will profit by movements in the value of the treaties. For example, we may buy Euro EUR and at the same time sell American Dollars USD. In March 2009, if we buy 10,000 Euros, it will cost around $ 13,500 dollars, as 1 Euro is worth $ 1.35 USD. If the Euro strengnts so that 1 Euro is worth $ 1.40 USD then if we sell our 10,000 then we will receive $ 14,000 and make a profit of $ 500.
So now that we understand the basic idea of forex trading, we can now explain some of the reasons why so many people trade currencies. The first reason is that the market is open 24 hours a day. This means that you can trade when you have the time, after work for example. If you trade stocks, you face the problem that the market is open when you are at work and you are not able to monitor the market. The forex market opens in the Asian region on Sunday evening and trades 24 hours a day until it closes on Friday afternoon New York time when the last trades are completed for the week.
The second reason that will explain why the forex market is so popular is that it is free to trade. There are no commissions. Brokers make money by charging a spread, but not a responsibilities. A spread is the difference between the buying and selling price. For example, a broker may offer you to buy Euro for USD 1.35, but if you then want to sell the Euro you will receive USD 1.33. This difference is called the spread.
Another important reason why people are attracted to trading forex is that brokers offer prices, news and charts for free. To trade, you will need real time prices and a charting package will help to understand the prices in a graphical format. Brokers will offer a free charting package that includes the latest prices, charts and often news.
Currency trading has high liquidity. This means that there is a ready market if you wish to buy or sell. If you want to buy a currency there is a need to have a seller that is willing to sell. If you wish to sell your currency position, you need a buyer. The market is large enough that there will always be a buyer or seller for any currency.
The last reason why forex trading is popular is that you can profit from rising or falling prices. Currencies can rise or fall in value. In Forex trading, you are able to buy or sell currency depending on your expectation. So now we have explained five advantages of trading forex. It is an opportunity to trade when it is convenient for you, with free pricing information, charting packages and news, with no commission costs, you can profit no matter which way a currency is moving and you will always be able to find a buyer or seller.
Source by Mark Green