Daily transactions in the currency exchange market total almost $4 trillion per day. This is more than the total of all the world’s stock exchanges added together. What’s more, there are just a controlled number of possible currency pairs compared to probably hundreds of thousands of company stocks. With so much cash concentrated in such a limited arena, price manipulation by the bigger players is much less of a difficulty, if it exists in any way.

As you can imagine, such high liquidity also means that it is very doubtful that a trade in any of the major currency pairs would have trouble getting matched, even in bad times. This is a massive advantage, particularly if you are trading large positions.

Development

So if forex trading has so many benefits, why is it that it is not been preferred till recently? The answer is the market itself only began for real in the 1970s when exchange rates stopped being permanently pegged by the ‘gold standard’ and were permitted to fluctuate.

Even then, it was only the banks, hedge funds etc who were involved in trading on the currency market at first. There had been no history of personal speculators getting on the telephone to a broker to trade in currency seeing as there had been in stocks. This suggests that it was not until the development of the Net the currency market opened up and foreign exchange vs stocks changed into a real choice for retail traders.