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Foreign exchange market is the mechanism by which purchasing
power of a firm is transferred from one country to another, to obtain and
provide credit for international trade, and also minimize exposure to foreign
exchange risks. Foreign exchange market involves
huge trading volume that represents the largest asset class in the world
leading to high liquidity. Another advantage is that conducting business globally
using foreign exchange market, you are provided with a platform to operate on a
24hour basis except on weekends. The market is also faced with some disadvantages
due to fluctuations in interest rates that lead low margins of relative profits
compared with other markets of fixed income. The market is also faced with the disadvantage
of investors being needed to have a lot of
capital to make good profits because there are low profit margines if the
investor is a small cale.
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