An Introduction To The Forex Market
Written by Sarah Martin
The forex market is the largest of all the financial markets and has an average daily trading volume of almost £2 trillion. As the London Stock Exchange averages £5 billion daily, it is evident that the forex market is a giant among giants. An increasingly popular way of trading and an attractive alternative to stocks and shares, the ever-growing number of sellers, along with buyers, helps to stabilise transaction prices, keeping them low.
The Attractions of Forex Online
Available around the clock, online trading enables novice traders to begin trading with small amounts of capital. While learning how to trade, using just a few currencies. Unlike other markets, forex trading is usually commission-free.
Customers pay all the relevant costs as part of the ‘bid/ask spread’, which is the difference between the lowest value a seller of currency will accept and the highest price that a buyer will pay for it. For example, if the ask price is £22 and the bid price is £20, then the bid/ask spread is £2. Given that currency is regarded as the most liquid of all assets, the ‘bid/ask spread’ for those who trade in the forex market, is extremely small; around one-hundredth of one per cent (0.0001).
Leverage Helps
Due to leverage, it is possible to start with a very modest amount of capital and use it to purchase currency worth much more. For example, a broker who offers leverage of 7:1 can lend £14,000 to purchase currency when the trader has deposited £2,000 in the account. This makes for considerably increased profits, but also means that losses will be similarly magnified.
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