Trade volume in foreign currency exchange trading has increased dramatically in recent years. Following the widespread adoption of the internet as a communication device, turnover in trade has exceeded more than $3.2 trillion each day. Yet, to attribute this dramatic increase in trade volume solely to the internet would simply downplay the inherent benefits that traders enjoy through the business of trading foreign currency. The fact is foreign currency exchange trading has many benefits as compared to other financial products such as stocks and bonds. We list 3 excellent benefits of foreign currency exchange trading for your consideration.
Key Forex Benefit #1- Recession Resistant
One of the key advantages foreign exchange traders enjoy lies within their insulation to recessions. While other financial products such as stocks are extremely vulnerable to recessionary pressures, the foreign exchange market is relatively immune towards such a downside.
This is due to the fact that the dollar can always be traded for or against other currency in the foreign exchange market. What this means is that the average trader would be able to tweak his investment strategy easily in accordance to general market conditions.
This gives him the ability to possibly profit even in the event of a recession if he plays his cards right. This contrasts greatly to the stock market where a recession would generally result in a broad market decline of the prices of various stocks.
Key Forex Benefit #2- Liquid Investment
Moreover, the foreign exchange market has the advantage of being extremely liquid. What this means is that investors would be able to withdraw from their investments at any point in time relatively easily.
This is due to the fact that the foreign exchange market has a global market, which means searching for a buyer to purchase a particular currency which you are interested to sell is usually not a big problem.
In contrast, bonds are usually highly illiquid despite their generally secure nature. In most cases, bondholders would have to wait till the maturity date of their bonds before they are allowed to withdraw their investments. This may be a problem should the individual require a sum of money to tide him past any unexpected emergencies.
Key Forex Benefit #3- Convenience
Last of all, foreign currency exchange trading is extremely convenient. Organized as an over-the-counter market, foreign exchange traders from all over the world are brought into contact each day via the internet. This means that traders would be able to trade with one another 24 hours a day, five days a week.
With no closing hours except on weekends, such an advantage would allow people who hold day jobs to be able to participate in foreign exchange trade after office hours. This provides greater flexibility as individuals would be able to focus on their work while yet being able to earn a supplementary income in their free time.
As a whole, there are many advantages associated with foreign currency exchange trading. While we have mentioned 3 excellent benefits of foreign currency exchange trading, these are by no means exhaustive. Such benefits are perhaps the main reason explaining the explosive growth in trade volume in the foreign exchange market in recent years.