Unique features of the FX Forex Currency Markets
For investors hoping to start trading forex, the forex market can look pretty unfamiliar. Compared to other kinds of financial markets, much is different. Here are just some of the things that make the forex market a unique trading environment.
1. Long trading hours – Trade 24/7
While some trading on stock exchanges might continue after closing, the forex market has a weekly closing time rather than a daily closing time. Forex is, by definition, international. Someone, somewhere in the world, will be trading forex at any time of day… except the weekend. Forex traders like to leave some time to enjoy the profits they’ve made without being tempted to look at what’s happening in the market.
2. Low profit margins
On the whole, currencies tend to be fairly stable. While there might be occasional collapses, currencies tend to rise and fall in fairly narrow bands. That’s quite a contrast to stocks and shares which can shoot upwards following a positive announcement or drop suddenly following a profit warning. That means profits tend to be small, but made up for by the large volume of trade.
Every country in the world has to trade foreign currency if it’s going to buy foreign products. That means you can find forex markets everywhere — although the major currencies still make up the bulk of trades.
4. The variety of traders
This wasn’t always the case. Forex trading used to be limited to banks with deep pockets and plenty of volume to move around. Today though, almost anyone can start trading forex. The result is that you could be buying your currencies from a multinational corporation and selling them to brokers in Indonesia.
5. The variety of factors that influence prices
While the price of company shares can be affected by macroeconomic factors such as the employment rate or taxation, the most important measure of a company is its profits. Currencies though can be affected by all sorts of things: by the Chinese government selling Treasury bonds, by oil prices, by inflation in the EU and by house prices in Wisconsin to name just a few of the things that make forex trading so exciting.
Try it out today with an account at paddypowertrader.com