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TRADING FX
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Since the demise of fixed foreign currency exchange rates in the early 1970’s the world economy has undergone sweeping changes. The collapse of the Bretton Woods Agreement in 1973 signaled an increase in currency markets volatility and trading opportunities.
The foreign exchange market dwarfs the combined operations of the New York, London and Tokyo stock and futures exchanges. The average volume in foreign exchange often exceeds USD 1.8 trillion per day compared to average volumes of only USD 25 billion of the New York Stock Exchange.
It is because of these volumes that the foreign exchange market is extremely liquid and volatile unlike other markets. The currency market is a 24 hour market enabling traders to take advantage each and every movement. This provides the currency trader with the ability to freely enter and exit trades at any point of time. This high volume is advantageous for a trader because transactions can be executed quickly and with low transaction costs (small bid/offer spreads).
An attractive feature of the foreign exchange market is the use of leverage. Participants can control substantial investments in currencies with as little as one per cent of that investment’s value on deposit. Therefore, even a relatively small movement in the currency can translate in to an extraordinary percentage gain.
As a result of these inherent market factors, currency trading has long been recognized as a superior opportunity by major banks, multinational corporations and institutional investment houses.
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