According to recent figures, an estimated $5.3 trillion is traded on the foreign exchange every single day. This is a striking statistic, but one that becomes even more impactful when you delve beyond the headline number. Currency trading volumes are continuing to increase incrementally across the globe, for example, particularly in Asian-Pacific regions such as Japan and Australia.
The former experienced an increase in volume of 28% between last October an April this year, reaching a staggering $61.8 billion in the process. Australia such an increase of 19%, as the foreign exchange continued to undermine its global popularity and renowned liquidity.
For all the popularity and vaunted benefits of forex trading, however, it remains an extremely tough and volatile marketplace that requires a considerable amount of skill, knowledge and determinism if investors are to succeed. Of course, the real key to success lies in first understanding the market, and the unique appeal that makes it such a competitive and lucrative space.
What is Forex Trading?
Forex trading is the process of trading international currency pairs, and one which takes place across three-daily sessions over a 24-hour period. While there are many ways to access the market, spread betting is arguably the most popular, as this enables traders to speculate on the future performance of one currency against another. The key benefit of this is that it negates the burden of ownership, allowing investors to profit even in a depreciating market by going 'short' and betting against a specific currency.
This makes currency a derivative trading option, and one that delivers margin-based returns and losses. As the investment is not tied up in the value of a stock, share or commodity, traders have an opportunity to drive significant returns with minimal a financial commitment. Conversely, there is also the opportunity to lose far more than you initially invested, depending on the course that the market takes over the course of the day. It is this delicate balance that makes the forex market so fascinating, as well as enticing those investors with a considerable appetite for risk.
Why is the Forex Market So Popular and how you Capitalise?
While the complexity and liquidity of the forex market may appeal to those with a gambler's heart, however, its standing among novice or inexperienced traders is slightly harder to understand. This has not always been the case, however, as historically the forex market was oppressive to unworldly traders and generally only accessible to knowledgeable practitioners or corporate firms with huge financial resources. The traditional broker system scarcely helped matters, and helped to create the impression of forex trading as an exclusive and overly complex entity.
So what has happened to change this? Firstly, we have seen the rise of online brokerage platforms and resources such as City Index, and this evolution has enabled aspiring professional and part-time traders to access a wealth of data, analysis and tutorials with a single click. This has broken down many of the barriers to entry that once surrounded the forex market, making it an accessible way of making money and boosting your annual income stream.
Online platforms also provide novices with access to a trading account, through which they can invest in forex and a host of other derivatives. They can therefore build and manage an entire portfolio through their account through a single resource, while also coping with the daily demands of volatile markets like the foreign exchange. Modern developments have also seen the creation of demo accounts, which enable newcomers to test and hone their trading strategy in a simulated, real-time marketplace.
And Finally: Heralding the rise of the Smartphone
There has also been a further stage in this evolution, however, and one that has truly levelled the playing-field for inexperienced and even risk-averse traders. This is the rise of the smartphone and live trading, as many of the aforementioned online trading platforms are now accessible through mobile apps. Given that more than one billion citizens around the world now own a smartphone, this underlines the accessible nature of the modern forex market and its incredible, mass-market appeal across multiple demographics.
Not only has mobile trading made the live of a currency investor easier, but it has minimised the risk of error and financial loss. After all, forex price movements can occur suddenly without warning, meaning that even the most well-calculated trades unlikely to deliver a return. By being able to receive news as it breaks and tailor your strategy while on the move, you can reduce losses and potential avert a disastrous course that could cause you to lose far more than you originally invested.
These real-time news feeds can also be accessed alongside live and historical analytical tools, helping you to use the data wisely and make the type of informed decision making that drives forex market success.
Marcus Turner Jones