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Here’s an interesting data point to consider. According to the Bank of International Settlements, in 2022, global currency trading volume hit a record high of USD 7.5 trillion a day, outstripping by 14% the previously recorded level of USD 6.6 trillion in 2019. [1]
Clearly, forex trading continues to gain in popularity, and you may be wondering what the buzz is all about. Well, read on to find out what makes forex trading attractive, and how even complete beginners can make their first forex trades in just five simple steps.
Why you might want to trade the forex market
24-hour trading available
Unlike the stock market, the forex markets are open for trading 24 hours a day. There is no cut-off time within the trading week, which means forex traders can trade on their own schedule. Note that the forex markets are closed on the weekends.
Why forex trading is possible round the clock is because currency trading is carried out across several forex centres around the world, located at different time zones. Some notable forex trading centres in the world include London, New York, Singapore, Japan, Hong Kong, Germany, and France. [2]
Largest, most liquid market in the world
The forex markets are by far the largest and most liquid market in the world, with several trillion dollars in trading volume on a daily basis, as mentioned earlier. In comparison, the entire global stock market is estimated to be worth USD 109 trillion in 2023. [3]
Arguably, the larger a market is, the more resilient it is against tampering or manipulation, as it becomes simply more difficult for any one party or group to influence the prices. Hence, one oft-cited benefit of forex trading is that retail investors are better protected against market manipulation.
Suitable for wide variety of trading styles
Forex trading is also highly flexible not only in trading hours but also trading styles and time horizons.
You can trade forex via a brokerage account for direct participation in the forex market. Alternatively, you can also use derivatives such as Contracts-for-Difference (CFDs) to gain exposure to potential opportunities arising from the interplay between currency pairs.
Given the market’s dynamic nature, forex trading is suited to both long- and short-term trading. Forex investors may hold positions ranging from a few minutes or hours, to several days or weeks, depending on the investing thesis they are pursuing.
Forex traders may potentially find success with a wide variety of strategies, such as low-profit, high-volume trading, or by focussing on higher total profits with a smaller number of trades.
Low barrier to entry with low capital requirement
Unlike, say, trading in blue-chip stocks, it is possible to start forex trading with a low initial capital. This makes forex a more friendly option for those looking to get started in investing on their own.
Also, leverage is often offered in forex trading, which allows you to amplify your gains from a winning trade.
Take heed that in a losing trade, leverage will increase your losses to a commensurate degree, so it’s important to learn how and when to use leverage during forex trading.
Types of forex markets
The forex markets may be classified into four types. Each of them differs according to how currencies are traded.
The spot market
In the spot market, currencies are traded immediately at the current, or spot, price. This also means that monetary transactions are the quickest here, with settlements usually taking no less than a day or two.
The futures market
Forex futures are traded based on an agreement between the buyer and seller to exchange currencies at a stipulated price on a predetermined future date. To settle the trade, exchange of actual currencies is not required, only the outstanding value. Forex futures are commonly used to hedge against expected spikes in currency value relative to another.
The forward market
Trades conducted on forex forward markets are similarly structured to those in the futures market. However, the forward contracts may be conducted off exchanges, which means they are unregulated and carry a higher level of risk. Similar to futures, forex forward contracts can be used to hedge against price changes of currency pairs.
The option market
Forex options are financial derivatives based on the prices of underlying currency pairs. Like equity options, forex options allow for a wide variety of strategies as traders may choose from a variety of prices and expiration dates.
Forex options also allow traders not to fulfil their obligations at expiration; meanwhile, in a futures contract, the terms must be fulfilled.
How to trade the forex market with Vantage – five steps
Step 1: Register for a live trading account with Vantage.
Step 2: Once your account has been approved, login to Vantage RAW ECN to learn more about the forex trades available to you. You can access over 40 of the most popular currencies in the world and enjoy low spreads from 0.0 pips.
Step 3: Build a trading plan. This will entail working out your budget, strategy, and timeline, as well as what analysis tools and methods you will use. You should also learn proper position sizing and other risk control methods.
Step 4: Choose your forex trading platform. We offer several ways to trade, ranging from desktop software to web-based platforms and our proprietary Vantage mobile app.
Step 5: Make your first trade. Once you’re ready to make your first trade, go right ahead. Login to your account and select the currency pair you want to trade. Tap “Buy” to open a long position, and “Sell” to open a short position. You can also set stop-losses or take-profits points.
Once you’re ready to close your position, simply make the opposite trade.
Trade popular currencies with Vantage
Vantage offers top forex pairs, low fees and robust features catered to forex traders of all experience levels. Start trading with a minimum initial deposit of just USD 50, and finely control your exposure level with leverage up to 1000 to 1.
Benefit from transparent access to global forex markets with no dealing desk intervention, and enjoy peace of mind with secure, regulated and segregated funds at one of the top 20 safest banks worldwide.
References
- “Global FX trading hits record $7.5 trln a day – BIS survey – Reuters”. https://www.reuters.com/markets/us/global-fx-trading-hits-record-75-trln-day-bis-survey-2022-10-27/. Accessed 18 Oct 2023.
- “London still world’s biggest forex trading hub but grip slipping as S’pore, US snare market share – The Straits Times”. https://www.straitstimes.com/business/london-still-world-s-biggest-forex-trading-hub-but-grip-slipping-as-s-pore-us-snare-market-share. Accessed 18 Oct 2023.
- “The $109 Trillion Global Stock Market in One Chart – Visual Capitalist”. https://www.visualcapitalist.com/the-109-trillion-global-stock-market-in-one-chart/. Accessed 18 Oct 2023.
