There are several reasons investors might opt to trade currencies instead of making use of other opportunities.
Accessibility: Forex trading takes place on many different exchanges across the world, and as a result, investors can make currency TRADES 24 hours a day during weekdays. The forex market is also the largest capital market in the world, involving more than US$5 trillion in notional value worth of transactions per day.1)
Liquidity: Because there is so much activity, the global forex markets provide substantial liquidity to traders. While certain assets may be more difficult to buy and sell, traders interested in currencies will likely find substantial opportunities. Liquidity risk can occur around major news events if liquidity providers seek to limit their exposure to market volatility.
Leverage: Investors can potentially access far more leverage when trading currencies than they can when trading other assets. However, it is important to keep in mind that risk is inherent to investment. While using leverage to make larger trades can amplify returns, it can also amplify the size of losses.
Global Exposure: Forex trading provides investors with an opportunity to obtain exposure to economies across the world. By taking a more international approach, traders might diversify more successfully or potentially achieve higher returns by putting their money to work in areas that have greater potential. Once again, risk is inherent to investment, so no returns are guaranteed and investors must conduct their due diligence on regions.
Low Trading Expenses: Because there are so many buyers and sellers, spreads are low and trading costs are modest.
Accessibility: Forex trading takes place on many different exchanges across the world, and as a result, investors can make currency TRADES 24 hours a day during weekdays. The forex market is also the largest capital market in the world, involving more than US$5 trillion in notional value worth of transactions per day.1)
Liquidity: Because there is so much activity, the global forex markets provide substantial liquidity to traders. While certain assets may be more difficult to buy and sell, traders interested in currencies will likely find substantial opportunities. Liquidity risk can occur around major news events if liquidity providers seek to limit their exposure to market volatility.
Leverage: Investors can potentially access far more leverage when trading currencies than they can when trading other assets. However, it is important to keep in mind that risk is inherent to investment. While using leverage to make larger trades can amplify returns, it can also amplify the size of losses.
Global Exposure: Forex trading provides investors with an opportunity to obtain exposure to economies across the world. By taking a more international approach, traders might diversify more successfully or potentially achieve higher returns by putting their money to work in areas that have greater potential. Once again, risk is inherent to investment, so no returns are guaranteed and investors must conduct their due diligence on regions.
Low Trading Expenses: Because there are so many buyers and sellers, spreads are low and trading costs are modest.
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