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FOREX is a short form for Foreign Exchange. A further shortened form is FX. It is nothing yet the fact always remains that a relative value of a particular form of currency. So let us have a look at day trading - is forex easier to trade than stock market indices?
Understanding the FOREIGN EXCHANGE market
A FOREIGN EXCHANGE market is an intercontinental market place wherever the currencies of diverse countries are traded in a straight line between two parties. Such a class of trading is as well called “off-exchange” or “over-the-counter (OTC)” trading. By off-exchange, we signify that this kind of trading does not make the most of the means of a stock market for its trading. The way of life of a FOREIGN EXCHANGE market has made it feasible for an assortment of companies and entities to fit into place themselves in global buy and sell. It smoothes the progress of the simplicity of exchange of one legal tender to another aligned with a fixed standard (yet the fact always remains that on a regular basis varying) rates of exchange of currency. The worldwide FOREIGN EXCHANGE market has now completely switched over from the traditional exchange rate system to something known as the floating exchange rate system. Whereas the traditional exchange rate system depended on a lot of factors of the country like its fiscal course of action, and the currency values remained fixed more or less, a floating exchange rate structure allows currencies of an assortment of countries to ebb and flow in their values in the foreign exchange market.
The FOREIGN EXCHANGE market has its distinct features
Trading volumes are huge in span. There is a far above the ground liquidity, which means that there is a least amount of range for loss of value. Picture perfect and unremitting trading: 24 hours a day, yet the fact always remain that only on weekdays. This is to a certain extent not like other markets like the stock market where 24 hour business transactions are not possible. Margin of profit (along with loss) is tapered. Lower the risks lower the gain! Debt Capital or Leverage is used as a supplement for equity capital. It allows a particular country to buy goods or services and pay in foreign currency. It has very low transaction processing costs. Unlike a stock market which operates through an exchange and involves high transaction processing costs (broker-to-broker costs, dealer costs, counter costs etc.), the Foreign Exchange market has these costs significantly reduced or eliminated. Transaction processing time is also significantly less compared to stock markets. There is a facility called Interest Rate Rollover. By using this facility, the FOREIGN EXCHANGE trader can earn overnight interests on the currencies held by him. Yet the fact always remains that he is also liable to pay interest on the currencies that he has borrowed. Yet the fact always remains that of course there will be, more often than not, a difference between these two interest rates. He can work out the difference between these two interest rates to his advantage. A few central banks are actively involved in the foreign exchange business. This process is known as intervention. Central banks try to influence FOREIGN EXCHANGE rates by actively buying and/or selling currencies in the market.
Think about the fact that the FOREIGN EXCHANGE market is open 24 hours a day.
This factually means that there is no time to sleep! What if the currency values suddenly drop while you were sleeping? Here comes the need to rethink your strategy. Look out and explore better times to trade. There certainly are better hours to trade in the foreign exchange market. They are called “FOREIGN EXCHANGE Hours”. Despite the fact those FOREIGN EXCHANGE hours will vary for different types of traders, yet the best FOREIGN EXCHANGE hours are certainly those that overlap market timings for two or more foreign markets. Yet the fact always remains that then again, market size plays a significant role here. We will study that now. A scrupulous market in all likelihood will prove to be more rewarding to get involved in that a combination of two or more markets. If you come across such a market, it will be natural for you to dedicate the majority of your time to this market. The “overlapping market timings aspect” will more or less get eradicated in this case.
Thus we learnt about day trading - is forex easier to trade than stock market indices?
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