Forex Investment and Currency Trading

• No commissions. No clearing fees, no exchange fees, no government fees, no brokerage fees.
• No middlemen. Spot currency trading does away with with the middlemen and allows clients to interact directly with the market maker responsible for the pricing on a particular currency pair.
• No fixed lot size. In the futures markets, lot or contract sizes are determined by the exchanges. A standard-sized contract for silver futures is 5,000 ounces. Even a “mini-contract” of silver, 1,000 ounces, represents a value of approximately $6,000.00. In spot Forex, you determine the lot size appropriate for your grubstake. This allows traders to effectively participate with accounts of well under $1,000.00. It also provides a significant money management tool for astute traders.
• Low transaction cost. The retail transaction cost (the bid/ask spread) is typically less than 0.1 percent under normal market conditions. At larger dealers, the spread could be as low as 0.07 percent.
• High liquidity. With an average trading volume of over $2 trillion per day, Forex is the most liquid market in the world. It means that a trader can enter or exit the market at will in almost any market condition.
• Almost instantaneous transactions. This is a very advantageous by-product of high liquidity.
• Low margin, high leverage. These factors increase the potential for higher profits (and losses).
• A 24-hour market. A trader may take advantage of all profitable market conditions at any time. There is no waiting for the opening bell.
• Online access. The big boom in Forex came with the advent of online (Internet) trading platforms.
• Not related to the stock market. Trading in the Forex market involves selling or buying one currency against another. Thus, there is no correlation between the foreign currency market and the stock market. A bull market or a bear market for a currency is defined in terms of the outlook for its relative value against other currencies. If the outlook is positive, we have a bull market in which a trader profits by buying the currency against other currencies. Conversely, if the outlook is pessimistic, we have a bull market for other currencies and traders take profits by selling the currency against other currencies. In either case, there is always a good market trading opportunity for a trader. Fund managers are beginning to show interest in Forex because of this non-correlation with other investments.
• Interbank market. The backbone of the Forex market consists of a global network of dealers. They are mainly major commercial banks that communicate and trade with one another and with their clients through electronic networks and by telephone. There are no organized exchanges to serve as a a central location to facilitate transactions the way the New York Stock Exchange serves the equity markets. The Forex market operates in a manner similar to that of the NASDAQ market in the United States; thus it is also referred to as an over-the-counter (OTC) market.
• No one can corner the market. The Forex market is so vast and has so many participants that no single entity, not even a central bank, can control the market price for an extended period of time. Even interventions by mighty central banks are becoming increasingly ineffectual and short lived. Thus central banks are becoming less and less inclined to intervene to manipulate market prices.
• No insider trading. Because of the Forex market’s size and non-centralized nature, there is virtually no chance for ill effects caused by insider trading. Fraud possibilities, at least against the system as a whole, are significantly less than in any other financial instruments.
• Limited regulation. There is but limited governmental influence via regulation in the Forex markets, primarily because there is no centralized location or exchange.
• Online trading. Today you may select from over 100 online Forex broker dealers. While none is perfect, the trader has a wide variety of options at his or her disposal.
• Third-party products and services. This immense popularity of retail Forex has fostered a burgeoning industry of third-party products and services.

Traditionally, investor’s only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971.