Why Forex Is So Popular?

Posted by : baskar M Saturday, January 4, 2014

There is no rival to forex in terms of trading volumes and popularity, and the markets for currency are significantly larger and more heavily traded than any other. This manifests into much greater liquidity in the markets, i.e. much more money for opening and closing positions, and as a result traders often feel more able to profit from fluctuations in the market price. Such is the popularity of forex that traders can see volumes of transactions around the clock, with markets open 24 hours a day for speculation. This presents a myriad of opportunities that traders can take advantage of when looking to identify cause for profit, and the flexibility of the instrument in allowing traders to profit from both rises and falls mean there are always opportunities to be had.

But why specifically are forex markets so much more popular than the alternatives, and why is it that an ever-increasing number of traders are turning to forex over other markets?

Money

There is a great deal of money in forex and to be made from forex, thanks in no small part to the advent of leverage. Leverage allows traders to increase the size of the transactions they trade, as a consequence of financing provided by the broker. This creates artificially higher transaction sizes so traders can make more money in a shorter period of time from the same degree of market movements. Such is the power of leverage that forex traders can often add significant percentages in gains over a period of hours or days – rates of return that simply don’t exist in other markets. While this might seem a bit too good to be true, it is in fact a large part of the appeal of forex over other instruments, and a crucial reason as to why the market is so popular. They say money talks, and in the case of the forex markets it yells out to new and experienced traders alike as a major plus-point of trading forex over any other market.

Speed

Because there is trade in forex around the clock, positions can be opened and closed with speed, and profits can be realized over a very quick period of time. Whereas a stock might gain 5% in value over a period of months and be considered to have performed well, forex traders would expect similar gains on the day (and at the very least the month), as a result of the degrees of leverage and the volatility in currency prices. For those that don’t have the patience to wait for longer-term investments, forex is a quick-style way of increasing the level and speed of returns that can be seen.

Liquidity

Another key feature in the popularity of forex is the liquidity of the marketplace, which means that positions can be executed and filled with much more speed. This results in a much faster-paced trading environment, and means that traders can withdraw their gains at a much more rapid pace. Of course on the downside, this also means the speed of losses will increase, but for those looking for yet more reasons to invest the fact that forex transactions can delivered benefits over a shorter period of time makes it a more efficient deployment of your capital than most alternative markets.

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