Advantages Of FOREX Market Quiz

Because of the huge amount of money traded every day, no one, not even central banks, can influence the price of a currency pair. As an example, the Bank of Japan tried to lower the yen in 2011, only to see it go to alltime highs as traders pushed the price back up. This is truly a free market!

The advantage of the forex market over the stock market is the low or no commissions involved. In the forex market, traders do not have to pay hefty fees to brokers or exchanges for executing trades. This is in contrast to the stock market, where commissions are typically charged for buying and selling stocks. The absence of commissions in the forex market allows traders to save on transaction costs and potentially increase their overall profits.

because buying one currency means selling another, there is no restrictions on short selling. If you think a currency will lose value, just click sell! No need to borrow shares or worry about margin calls.

Forex is a 24 hour market so there's no reason to worry about a stock dropping before the market opens and you having to sell at a awful cost. You can keep track of your investments day-round! And there are no holidays too!

The reasons for smaller exposure to foreign exchange than US money center are regulation, prudent individuals, and smaller size of assets. Regulation refers to the rules and guidelines set by regulatory bodies that limit the extent to which a financial institution can engage in foreign exchange activities. Prudent individuals indicate that individuals or institutions may choose to have smaller exposure to foreign exchange to minimize risk. The smaller size of assets implies that smaller financial institutions may have limited resources to engage in foreign exchange activities compared to larger money centers. Hence, all of the above reasons contribute to the smaller exposure to foreign exchange.