forex

Why is forex different from other investments?

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In a layman’s term, Forex is the short form of foreign exchange. If you are residing in US, then any other currency apart from the US Dollar will be foreign exchange currency. Forex has different buying and selling rates. Today $1 will be equal to 0.532396 Pound but tomorrow this same figure may change. As of now, the net trading amount stands at a whopping $2 Trillion. This amount is being traded by banks, trading partners, government, corporate and others. A foreign exchange trader’s job is to speculate and derive profits by buying one currency and at the same time selling another. The people who are involved in these transactions or investors in the Forex trade market reap profits or incur losses everyday depending on the movement of the market.

The question here is why should you invest in Forex? Like stock markets and bonds, Forex also has its own benefits and advantages. In stock markets you are selling stocks and bonds but in a Forex market, you are selling or buying currencies. Let us try and see what are the various benefits available and how it is different from other investments.

1. There is no fee involved: You will not be charged any commissions or exchange fees. There is no applicable brokerage fee or foreign exchange fee or middleman.

2. Fixed amount: There are no fixed amounts unlike in Stocks. You can start your trading from $300, $500 or use higher amounts like $10,000. It all depends on how comfortable you are.

3. Transaction cost: There is no transaction cost involved. Since there is no officially declared commission involved hence the spread between the bid and the ask price is around 0.1%, which is cheaper as compared to other markets.

4. Liquidity: There is a high amount of liquidity in Forex dealings. Whether you are a trader or investor, you can leave the market whenever you want or join back at any time.

5. 24 hour: The foreign exchange market is open 24 hours a day and starts from US in the morning, passing through Asia pacific, South East Asia, Europe and ends again in the US. Due to its 24-hour routine, it is easier for a trader or investor to buy and sell at any time of the day or night.

6. Access: You can access the Forex market by either being there, through a trader or even online. You can sit at home, study the market and make your profit through using high-speed internet connections and trading software.

7. The backbone: The Forex market is formed by a backbone consisting of a dealer network that is spread throughout the world. These include commercial banks, which are continuously involved in trading with each other. Like the New York stock exchange there no single most important hubs for Forex. And one of the most important things is that the Forex market will not be affected by any kind of political unrest or other social and political factors.