The first characteristic of currency trading markets is that they are liquid. The elements of trading are ‘purchase’ and ‘sale’. Currency trading therefore is the buying and selling of currencies in the currency trading markets. Liquidity in forex trading refers to how easy a forex trader can buy and also sell currency. True liquid currency trading markets ought to not only provide the ease of buying and selling foreign currency but also to enable the forex trader sell considerable volumes of foreign currency with the currency trading markets remaining stable in terms of currency prices.
The second characteristic is transparency. Currency trading markets are transparent. Transparency means availability of information that is accurate and how fast forex traders can get access to it. If the forex traders have great access to the information they need, it means such currency trading markets are transparent. Information in currency trading means success. The more forex traders have accurate information the faster they make trading decisions and are more likely to make profits.
A third characteristic is that in currency trading markets, trading costs are minimal. The basic idea in any market is to make profits. Consequently, this means forex traders in currency trading markets have to incur costs of trading. Successful markets, for any trader should have low costs of carrying out business. This will help in profit maximization. Currency trading markets have this advantage. There are no commissions. Forex trading costs are mainly limited to the spreads. This has the effect of lowering the trading costs to a minimum. This is the reason behind the huge numbers of people going into forex trading.
A concluding characteristic of good currency trading markets is trending. One challenge that traders face in business is to know time to buy and time to sell profitably. It is also vital that a trader can predict the direction of the market. In currency trading markets forex traders utilize the technical analysis technique. This technique is able to give a history of the market performance and again it gives trends that can predict the future of the market. Trending in currency trading markets is quite strong thus it enables traders to determine when to make an entrance or an exit into trading positions.