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There are many markets available for traders,
each serving different purposes. Stock markets are for investing in companies,
crypto markets are for investing in blockchain projects, and so on. But the
biggest market among them is forex. Why is the FX market the biggest? In this
article, the team of analysts from FTD
Limited, the finance
broker, discusses the reasons behind this.
Established in 2017, FTD Limited is a
multi-asset brokerage firm providing a trading platform with access to a wide
range of asset classes, including FX, equities, futures, and indices on major
global exchanges. Specializing in FX trading, their technology emphasizes fast
and efficient execution, clearing, and liquidity solutions. With a global
presence in the Middle East and Asia, FTD Limited serves institutional
investors, high-net-worth individuals, and professional clients.
Factors Contributing Forex Market
Dominance
There are many factors that influence
a market’s success; some are general, while others are specific to the market’s
nature. Some factors benefit traders, while others may pose challenges. Here
are some key factors of the FX market:
High Liquidity: The forex market is the largest market
globally, with a daily trading volume in the trillions of dollars. High
liquidity is ideal for traders because higher volume results in lower spreads
and slippage, significantly reducing trading costs compared to many other
markets. The low cost of entering and exiting trades attracts high-frequency
traders, algorithmic traders, and day traders, creating even more liquidity. At
FTD Limited, we work with some of the top liquidity providers to keep trade
costs as low as possible, providing our customers with a competitive advantage.
Leverage: The forex market operates with leverage,
which, when used efficiently and with proper risk management, is a significant
advantage for both traders and hedgers. With leverage, hedgers need much less
margin to hedge against risk, allowing them to use their unused margins in
their businesses, thereby increasing efficiency. Small traders can access the
largest market in the world with less capital, though at potentially higher
risk. Professional traders can use their excess margin in different investments.
Hedging: Companies often need to reduce their risks
by hedging in the markets. For example, miners and heavy industry companies
hedge by selling or buying metal contracts, while farming companies do the same
with food commodity contracts. As the economy becomes increasingly global,
almost all companies face currency risk—not just manufacturers or farmers, but
also retailers, tech companies, and even service providers. The most efficient
way to hedge against currency or commodity risk is through the forex market,
due to its high liquidity, low costs, and lower margin requirements. FTD
Limited has specifically adapted to meet the needs of companies and
professional investors, providing a competitive edge tailored to individual
needs.
Global Nature and Access: The forex market is vast. When the U.S.
market is closed, EU markets are open, and when the EU markets close, Asian
markets are open. This fluidity gives traders the opportunity to trade 24 hours
a day, five days a week. In the event of urgent news, traders do not need to
wait hours to get local market to open and hedge against risk. Additionally,
the global nature of the forex market creates many opportunities for traders to
take advantage of macroeconomic developments from all over the world, any hour
of the day.
Market Analysis and Educational
Resources: There is a wealth of material
available for traders, ranging from beginners to professionals, whether it be
educational content or market analysis. Almost all forex companies, as well as
some independent websites, provide these materials. At FTD Limited, we offer
both concise, to-the-point analysis and advanced macroeconomic articles at articles.ftdsystem.com.
Technological Advancements and Algorithmic
Trading: In forex markets, timing is
everything. Quick data flow with minimal access problems is key in today’s
trading environment. The rise of algorithmic and AI-based trading has made
technology a fundamental part of the forex market. FTD Limited’s fixed API provides
professional traders with the tools to use advanced software for any AI or
algorithmic trading systems they desire without issues. Additionally,
MetaTrader 5 offers numerous tools to create your own systems or easily use
community-created ones.
Comparison with Some Other Markets
Stocks: Stock markets are often the first that come to mind when thinking about
investing or trading. They have a long tradition, plenty of resources, and a
large community. However, for those not investing long-term, there are some
downsides compared to the forex market. Stock markets are local, and their
liquidity less than of forex. With so many stocks available, studying them
requires a significant amount of time, and without leverage, more capital is
required to participate and gain significant enough profit. The advantage of
stocks is their tendency to trend upward over the long term, as long as the
company in question is profitable and growing steadily. This makes stock market
trading less risky, but it also offers smaller and fewer profit opportunities.
Bonds: The bond market may be less risky than
stocks, but it has less accessibility and is more long-term in nature.
Crypto: With the rise of Bitcoin, crypto markets
quickly gained a lot of traders. They experience huge volatility spikes, which
can offer opportunities for significant profits. However, the real problem with
crypto markets is liquidity. Due to low liquidity, major price movements
usually occur within minutes, and between these moves, the market is often too
calm to trade. “Pump and dump” schemes typically give large players
(whales) more opportunities to manipulate the markets, making trading and investing
in crypto highly risky.
“Forex,
the largest and most liquid market in the world, offers unique opportunities
for traders and businesses alike. With proper risk and capital management,
forex can be one of the safest and most rewarding ways to trade, especially
when partnered with a reliable broker. The forex market also plays a crucial
role for businesses looking to hedge against currency or commodity risks. At
FTD Limited, we provide comprehensive forex trading services, offering a robust
and secure platform that empowers traders to navigate this expansive market
with confidence and efficiency.” comments
Burc Oran, Senior Market Research Specialist at FTD Limited.
For more information, please contact: info@ftdsystem.com