As with every other investment sector, Forex trading has its own characteristics that make it unique and distinguish the industry from traditional investment areas such as the stock market and real estate. In this article we will move away
from the technicalities and continue exploring the main characteristics of Forex trading and the main factors that make it appealing to investors worldwide.
Some important characteristics of Forex are:
1) No physical purchases: In Forex you buy or sell currency pairs such as the Euro against the U.S dollar (EUR/USD) with the aim of profiting when prices go up or down. While you trade there is no involvement of physical purchase of currencies making it easier and much faster to trade with their digital equivalent. Moreover since leverage is a major factor you are also able to trade volumes that you cannot actually afford, maximizing returns but also the risk.
2) Vibrant Market: Forex is a very active and liquid market. As the volumes traded and investors joining are rising every day, you can buy or sell any Forex instrument with no paperwork, middlemen or limitations in volume throughout the day 24/5.
3) Automatic Trading: With the introducing of Forex robots and Expert Advisors, automatic trading is also growing and gaining big momentum in the Forex community. This type of trading gives the ability to investors to set a pre-schedule plan of trades that they wish to make at specific times and the software will executed them automatically on their behalf. This is extremely useful when you wish to be active in the market and trade without the need of being physically in-front of the computer at all times. The cost and functionality of Forex Robots and EAs vary from system to system.
4) No Fees: There are no fees or commissions involved in Forex. Your trading is done directly with the liquidity providers (banks, reserves etc) through firms known as brokers. These organizations are compensated for their services in the form of the "bid-ask spread" which is the difference between the "bid price" and "offer price" for a specific currency pair. Lastly the vast majority of retail brokers offer demo accounts to clients that wish to trade with virtual money before investing their own.
If you are an active or prospective Forex trader it is always important to focus not only on the strategies but also have a complete understanding of the operations of Forex trading to ensure a profitable experience.
Richard J Broomstick is a financial writer. Check out his work and learning everything about forex trading at http://fxmoz.com
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