Why is Forex the Most Popular Market to Trade?

We’ve all seen those impressive figures bantered around about the Forex trading market. 5 trillion dollars in trade each day, 25 times the trading volume of the equity markets, etc. However, none of these statistics tell us why the foreign exchange market is actually rising in popularity.

In this article, we take a close look at the trends within the financial markets, to see exactly why it is that FX trading is becoming so popular among retail investors.

Endless Liquidity

One of the best things about the FX trading industry is that no matter what currency pair you are trading – there is almost an endless amount of liquidity in the market. This is even true for the exotic pairs.

Liquidity is important because it means that your trades can be entered and exited at any time, almost regardless of market conditions. With virtually endless liquidity – phenomena such as slippage and market gapping are almost non-existent.

High Leverage Trades

Whilst the amount of leverage a trader can use per trade has fallen recently, it is still up there with some of the most highly leveraged financial instruments in the world. With Forex trading, it is not uncommon for traders to employ up to 200:1 leverage – meaning that for every $1 in the account, $200 can be used to trade on the market.

Leverage has many important implications for FX trading, including:

  • The ability to magnify profits without the need for additional capital
  • Traders can participate in the markets without needing a huge amount of starting capital
  • Returns on Investment can be far higher than with traditional investments, without the additional risk

24-Hour Trading

The FX trading market is open 24 hours per day, 6 days per week. This is because of the markets open when the New Zealand markets open (Sunday night American time), and close when the US markets end on Friday. Essentially, this is a 6 day trading week – and no matter where you live or which time zone you are in, you can still actively participate in the Forex trading markets.

This is a huge draw card for many people – especially those who might have to stay up all night to participate in an overseas equity market. Alternatively, people can trade part time, whilst keeping their day job and simply trading around those set work hours.