The Foreign Exchange Market and its features

Money is very important nowadays because it affects our lives every day and the lack of this resource can influence negatively other aspects of our lives.
The object of this dissertation is the desire to offer and to explain to those who read this work the opportunity to have a better understanding of how a new financial instrument can help these people thanks to its high potential.
However, most people could say that the secret is to be a positive thinker; of course, positive thinking is a great start, but by itself it is not enough to make money.
What I learnt, and actually what I try to prove in the following chapters, is that it is important to have some strategies, some step-by-step plans in order to change any financial situation.
But it is impossible to do this without including what I think is the main point: to have the right financial vehicle.
In fact, as Warren Buffet said: “The best jockey on a dead horse doesn’t go anywhere” ; so having the right “horse” or better the right financial vehicle is very very important today.
Therefore, this work was born as an answer to a simple question: “What is the fastest financial vehicle to make money today?”.
Under the word “vehicle” the Collins dictionary reports this meaning: “a machine which has an engine and is used to carry people from place to place.” Now from a financial point of view, if someone needs to make a travel, metaphorically, from the poor’s land to the rich’s land, he needs a financial vehicle.
Everybody knows that there is a big difference between travelling by car and travelling by jet plane; moreover different abilities are required to drive these two means of transport. The same happens in the financial sector.
So to recap, this thesis tries to give a quick view on the main characteristics of what today is considered “the jet plane” of the financial vehicles: Forex!
What is Forex?
Forex is a word that most professional investors use to refer to The Foreign Exchange Market.
This market deals with the exchange rates of different currencies. In other words people who operate in this market buy a currency pair and sell it to other traders in order to invest or simply to gain a profit.
The Forex is carried out on-line, like currency futures or stock markets: it has not a physical position. Trading occurs over computers and telephones worldwide.
Why is Forex “the jet plane” of the financial vehicle?
It is considered “the jet plane” of the financial vehicle for its unique characteristic to be able to speed up the process of making money.
Here are the main aspects that make the Forex market the most populated market in the world:
• High liquidity,
• High leverage,
• Low costs,
• Never sleeping trading.
It is clear that the above mentioned areas are only some of the things that an investor or a trader should know to operate actively.
High liquidity
It has been reported that the Forex market is the largest financial market in the world with a daily turnover of just over 3 trillion U.S. Dollars, more than all other markets together.
This market is overpopulated by more than 4,600 international central banks, professional investors, private investors, traders and brokers.
High leverage
A leverage gives a trader the opportunity to trade volumes 100 times (or more) the value of the initial investment. This happens thanks to brokers who give their customers the option to trade on borrowed capital. This capital is considered as a loan on the marginal account (deposit) opened by a trader.
Therefore, traders do not have to invest thousands of euro to work on this market, because they need a small amount of money and the rest ( the leverage ) is lent by brokers.
This is the key point, because it means that whoever wants to approach this kind of activity does not need to be extremely rich or to invest large amount of money.
Low costs
The foreign exchange market is considered the most cost efficient market, in terms of both commission and transaction fees. This cost efficiency comes, first of all, from the fact that all transactions are carried out electronically: this reduces drastically the costs of doing business.
Moreover, the use of a trade station (the free downloadable software used to trade on Forex) allows you to access the market information without having any additional costs. It also gives you the opportunity to train yourself using virtual money in order to make practice.
The only real costs are referred to the insurance costs and opportunity costs which well be dealt with in the relative chapter.
Forex never sleeps
The Forex market is open 24 hours a day, with the exception of weekends, from about 6:00 p.m. on Sundays to about 3:00 p.m. on Fridays.
This is a very attractive aspect for those who already have a full time job: in fact they have the freedom to choose the best time to trade, morning, noon or night.