The $5 trillion daily volumes the forex currency trading market commands globally make it the most significant financial market on earth. Want to know more? Read on.
According to the WSJ dollar index, the value of the greenback has skyrocketed hitting its highest value of the last 14 years. So a U.S Canucks fan popping into Vancouver for the weekend game will get at least 31 cents more for each dollar they spend on that Molson Canadian mug of beer and other travel costs. A U.S dollar today is worth 1.31 Canadian dollars.
The History of Forex Currency Trading
Forex currency trading is also known as FX trading and in its most basic form is performed across currency exchange shops and airport exchange booths worldwide, to aid trade across international borders. It is as old as history itself dating as far back as the Babylonian empire, where a trade for goods and services were made in exchange for other valuable items.
Today’s monetary system has been shaped by various political and economic upheavals and from it has risen a currency trading system of impressive stature. The FX market trades over $5 trillion in volumes daily, making it the largest trading platform on the planet.
It’s very loud and famous competitor the NYSE trades a comparatively paltry $22.4 billion daily, which should give you an insight into just how ginormous the FX market really is. The colossal forex currency trading volumes though are sourced from various trades around the world with retail trades bringing in at least $1.8 trillion daily.
The difference between stock and currency trading
Trading in currency and stocks has some similarities. Think of money as stock not of a company but of a country. A currency’s value is a direct reflection of the forex currency trading market’s view of a country’s economic health. This value is what is paired with other countries’ currencies and then traded for profit.
While the stock exchange market has a decentralized exchange platform, FX trading is an over counter form of trading between electronically connected brokers and banks. Traders can access the massive market through various electronic platforms and use their currency speculation prowess to profit from what is a highly liquid market.
Why is this market so popular?
- High liquidity and volatility
Cash is the most liquid asset there is, followed by others assets such as real estate, collectibles or fine art. The FX currency trading market is a very active market, moving a massive volume of trade daily and opening doors for traders to make quick profits.
- Easy to enter
With as little as $100 anyone can open an account online and get trading. It is also accessible 24 hours a day for five working days so you can partake of it any time of day or night, no matter where you are, so long as you have an internet connection.
- Low costs of transactions
Online currency trading costs are covered by the spread acquired through trades, so you don’t have to pay a brokerage fee.
- Leverage
Little amounts of capital can be leveraged to give more substantial profits.
