T he foreign exchange market is largely made up of institutional investors, corporations, governments, banks, as well as currency speculators. Unlike the stock and futures market that are housed in central physical exchanges, the Foreign exchange market is an over-the-counter market, decentralized market completely housed electronically. Though most investors are familiar with the stock market, they are unaware how small in volume it is in relation to the Forex market. In fact, it would take thirty days of trading on the New York stock exchange to equal one day of Forex trading!
Traders from other markets are attracted to the Forex because of this extremely high levels of liquidity. It allows large trading volumes to enter and exit the market without the large fluctuations in price that would happen in less liquid market. This means that if you will never get in a position because of the lack of a buyer. This liquidity can vary from one trading session to another and one currency pair to another as well. With volume concentrated mainly in the US Dollar , Euro and Yen, Forex traders can focus their attention on just a handful of major pairs.
In addition, the greater liquidity found in the Forex market is conducive to long, well-defined trends that respond well to technical analysis and charting methods. In sum, the Forex market size and depth make it the ideal trading market. This liquidity makes it easy for traders to sell and buy currencies.
This is why traders from all different asset classes are turning to the Forex market. Advantages of Trading the FX Market 8 of DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Click here to dismiss. Talking Points The Forex market is the largest and most liquid market in the world. Foundations of Technical Analysis: Classic Chart Patterns, Part I. The Three Tenets of Price Action. Upcoming Events Economic Event. Forex Economic Calendar A:More...