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