Characteristics of the Foreign Exchange Market

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This article looks at the characteristics of the foreign exchange market.

Foreign Exchange Market Trading Times

Before you trade on the foreign exchange market you should consider all the characteristics that you will find.  When you know about the character of the market you will be able to determine whether or not this is the right market for you to trade on.  There are number of good and bad points that make up the foreign exchange market.  You should consider all of them so that you can make a truly informed decision about whether or not you should trade on the foreign exchange market.

The Trading Times of the Foreign Exchange Market

The first characteristic that you should know about the foreign exchange market is the trading times.  The forex market offer 24 hour trading during the week and is closed over the weekend.  This is a characteristic that you will not be able to find on the other trading markets.

The Decentralisation of the Market

The 24 hour trading times that you are able to get with the forex market will come from the decentralised nature of the market.  The forex market does not have a central exchange that trading will need to be conducted through.  This means that the market is not subject to business hours as many of the other trading markets are.

The Regulations of the Market

The decentralised nature of the market does not only affect the trading hours that are offered.  As there is no central exchange there is no way for the market to be regulated.  This is seen as both a good and a bad point to the market.  While the lack of regulation allows for greater freedom when trading it also opens the door for scams and fraud.

There are a number of countries that have overcome the lack of regulations.  These countries have taken to regulating the only part of the market that has to be based in a single location.  There are a number of countries that regulate the brokers that are located in their country.  These regulations vary from country to country with some being stricter than others.

The Asset You Trade

When you trade in the forex market you are going to be trading currency pairs.  Forex is the only trading asset that is traded in pairs and this is due to the nature of what you are trading.  When you trade forex you are trading on the changes in the foreign exchange rate.  The only way you are able to achieve a foreign exchange rate is to compare one currency to another.  This means that when you trade you will need to trade one currency for another.

It is possible to trade any currency in the world on the forex market.  However, there are certain currencies that are traded more often than others.  These currencies are the largest economies in the world and they will be the easiest to trade.

The Capital Needed to Trade

The last characteristic that you have to consider is the capital you need to trade.  The forex market is unique in the fact that you can start trading with a very small amount of capital.  There are some brokers that allow you to open a trading account with as little as a single dollar.

 

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