The Forex Market is the largest financial marketplace in the world.

The Bank of International Settlements estimates that average daily turnover in the FX Market is around $4 trillion. In comparison, the New York Stock Exchange turns over about $75 billion a day. That means the FX Market is over 50 times larger than the NYSE!

In the last 10 years, traders have swarmed to the Forex Market due to its many advantages. In this article, we are going to discuss 5 key reasons why the Forex Market is so attractive to traders.

*Liquidity*

Due to the enormous amount of daily volume, the Forex Market is extremely liquid.

Forex Market Can Be Liquid

That means that traders have no problem getting in and out of positions. Liquidity will ebb and flow throughout the day as capital flows adjust according to the time of day, but even in times of “illiquidity” in the FX Market, a trader is not going to have a problem entering and exiting the market.

*Low Transaction Costs*

The enormous amount of liquidity in the FX Market has a direct spillover effect on pricing and the trading costs. In the Forex Market, a trader does not pay commission, as a general rule of thumb. At most brokers, a trader will pay the spread (the broker will increase the spread to make a profit), which is the difference between the bid and the ask. Spreads were already low in the FX Market compared to other financial markets, but in recent years spreads have tightened even more as liquidity providers fight to earn more business. A forex trading platform will show real-time pricing.

*24 Hour Market*

The Forex Market opens on Sunday evening about 5 pm est and runs until Friday afternoon about 5 pm est. The market never closes during this time period. Instead, capital and liquidity flows simply move throughout different regions of the world as banking institutions open and close shop each day. This makes it easy for traders to manage open trades in light of unexpected macroeconomic events or other concerns in the overnight session.

*Leverage*

This is probably the biggest attraction for traders, but also it is probably the number one killer. Many traders do not understand the true power of leverage and its ability to destroy a forex trading system in a very short amount of time. Typically, in the stock market a trader may be able to leverage 2:1. In the FX Market a trader can leverage 50:1 in the United States, and 100:1 or more in other parts of the world.

If a trader has 50:1 leverage, that means that with $1,000 in a trading account, he can control a $50k position in the market. This high leverage can lead to quick gains, but there is significant risk of loss, and the losses can happen quickly. For example, if a trader has $1k in his account and 50:1 leverage, and he is trading EUR/USD, then the max position he can hold is $50,000. With this position, each 1 pip movement will be worth $5. That means that a 200 pip move against him would wipe out his entire account, and during a major news announcement on a volatile currency pair, a 200 pip movement could happen within a few hours.

*Ease of Analysis*

Although this point is debatable, many traders believe the FX Market is easier to analyze since there are only a handful of major currencies. Most traders simply trade the majors: euro, U.S. dollar, British Pound, Swiss Franc, and Aussie Dollar. Traders can simplify even more by only trading one pair. The EUR USD is the most popular currency pair.

The Forex Market is not only the largest financial marketplace in the world, but it is also the fastest-growing.

Trading currencies is risky. Beginners should keep leverage low and remember to only speculate with funds that risk capital, i.e. funds that you can afford to lose.