There are a number of compelling benefits to trading forex as an asset class. Unlike other markets, it trades around the clock throughout the working week, meaning that you can trade any currency pair of your choice from Sunday night all the way through to Friday evening.
Forex is also the most liquid market in the world, by far. Over $6.5 trillion is exchanged on the global currency markets each and every day. The more liquid a market is, the less of an effect any one party can have over the price, which means that it’s far less prone to manipulation.
Forex is also the original decentralised market, long before crypto even existed. FX isn’t traded on a single venue, but over-the-counter wherever two parties are prepared to exchange one currency for another, this is why you can trade it round the clock.
It’s the lifeblood of the global economy, and touches all other markets as every single transaction, whether it’s the procurement of commodities, the purchasing of bonds, or the trading of stocks, involves a foreign exchange component, especially if your national currency is not the US dollar.
Finally, forex is a great training ground for traders. As well as touching all other markets, FX tends to be less volatile than other asset classes, so potential drawdowns tend to be smaller than in other asset classes.
Currencies are always traded in pairs, so it’s always the fate of two nations or economic unions that are held in balance in any currency trade. In contrast, a stock can go to zero if the company behind it fails. FX is more complicated than that.
Take EURUSD as an example, the exchange rate for this pair refers to the relative strength of the currencies of the world’s superpower, versus a monetary union comprising 19 countries, one isn’t likely to bankrupt the other overnight.
This is useful to all types of traders. Beginners benefit from gentler price swings, and experienced traders are able to use leverage to increase their potential returns when they have a high degree of conviction.