A market where the currencies of various nations are bought and sold is called the foreign exchange market. It is abbreviated as Forex or FX. With about $3 trillion being traded on a daily basis, Forex is the world’s largest market. The span of forex is vast, with the market satisfying purposes ranging from cross-border investment, currency speculation to trade in goods and services.

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How Forex Market Works
The Forex market involves banks, investment companies, commercial companies, hedge funds, investment management firms, brokers and retail investors. There is no centralized exchange for the Forex Market. Trading generally takes place through the inter-bank market, which is a network of more than a thousand banks. Each bank in the network trades directly with others with the help of an Electronic Broking System (EBS), where offers and bids are placed and then compared on the basis of price.
The Inter-bank forex trading continues 24/5.5, from Monday till midday on Saturday. On a single trading day, the market opens in Australia and shifts operations throughout the day to Asia, Tokyo, Hong Kong, Singapore, Europe and New York. The Forex trading day ends with the close of trading in New York.
Trading always occurs in currency pairs in Forex. The pricing of a currency pair in this market is determined by the demand and supply of a currency in relation to the other in the pair. Apart from banks’ currency pairs are bought and sold by individual investors through brokers.
The Forex Market Benefits
There are many benefits of Forex market which are as follows:
1. Maximum Liquidity: With a daily turnover exceeding $3 trillion, the forex market is the world’s most liquid market. A single trade amounting to $200-$500 million is common.
2. 24/5.5 Operational: The market is open throughout the day at some parts of the world. Hence, investors have the flexibility of making their own trading schedule through a broker or directly online world-wide.
3. Extensive Leverage: In forex market, leverage can range from 50:1 to up to 500:1 which means that if you have $5,000 in your trading account and your broker is offering 150:1 leverage, you have the option of trading up to $750,000. This kind of leverage offers you an opportunity to earn immense profits, even with limited capital.
4. Market Trends: Trends in this market are never bearish, as a decline in the value of one currency represents a rise in the exchange value of another. Thus, investors have the opportunity to earn profits at all times.
5. Some other benefits include tax-free trading, online trading, and direct trading. All these benefits makes the forex market a ground of extraordinary players who are ready to invest and earn profit on their wise decision and broad forecast.

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Drawbacks of the Forex Market
Some drawbacks of the forex market are as follows:
1. Very Impulsive: The exchange value of a currency pair is dependent on quite a few factors which makes it extremely difficult to predict the course of the market.
2. Heavy Losses: As investors can trade with large amounts of cash due to the high leverage offered by brokers, they can suffer substantial losses if they fail to invest in the right currency at right market
3. Extremely Volatile: The Forex market is extremely volatile, with the exchange value of a currency pair changing several times within a trading day. A novice investor might get troubled with the volatility and suffer huge loss
