Aside from being the market that sports the highest number of market participants, the foreign exchange market also has other great benefits that some investors tend to overlook.
The forex market is quite the most liquid market among other financial markets, plus it lets you try out a bunch of trading strategies that wouldn’t be able to use if you choose other financial markets. It is also very cheap, meaning you don’t have to constantly take fees, commissions, and charges into account every time you trade and try to earn some profits.
Let’s talk about the other lesser-known advantages of choosing the foreign exchange market and doing forex trading.
It has no central exchange; it’s deregulated
The forex market is an over-the-counter (OTC) market. It operate all over the world. And because of those reasons, it is also decentralized and deregulated, meaning there is not central authority that oversees the whole market, though there are regulators for the forex brokers.
And even if countries’ central banks do something about the forex market, that kind of event happens very rarely and only in situations where it is much needed. The central banks interfere only during extreme conditions. And when the banks do interfere, the possible event itself is already likely priced into the market.
The deregulation also helps keep the costs cheaper because orders are directly placed on the broker. And then the broker executes the trades on its own. As if that’s not enough, the deregulated nature of the forex market means that you can try short selling, which isn’t something that you can do freely to some assets in other financial markets.
There are several currency pairs
In forex trading, you are always dealing with two currencies at a time and these two currencies make up the currency pairs in the currency market.
There are 28 major currency pairs in the forex market, and these currency pairs have 8 major currencies in them.
Now, if you want to choose wisely the currencies and currency pairs that you want to trade, you might want to have a very convenient timing, meaning you need to be updated and study the fundamental factors that affect these currencies. Keep yourself updated to economic news and reports that can and will affect the price movements of your currency pair.
Also, each currency pair have distinct qualities over the others in terms of volatility and liquidity. You don’t have to stick to only one currency pair if you want something different. You can always switch pairs depending on what you think is best for your profits.
You got tools at your disposal
When you try forex trading, you’ll discover that you have tons of tools, charts, and indicators that you can use anytime you want. In fact, if you’re more of a fundamental analyst than a technical one, you can still use various fundamental analysis-oriented theories to understand currency price movements.
The different technical indicators you can use have different functions, so that means you don’t only get one kind of service from them. You can even use them in conjunction with each other to hit multiple birds in one stone.