Why You Should be Thankful for Day Traders, Even if You Invest in Forex Trading

by Andrew McGuinness     Jul 16, 2019

In our daily lives, it's impossible to separate ourselves from corporations. Take a look around your home, office, subway car, or anywhere else you're reading this article, and it's likely that you're surrounded by products that were made by a corporation. You might even be reading this article inside a coffee shop that's a franchise of a corporation! Corporations make the things that we eat, wear, use, and read...but what determines the value of a company? What allows Louis Vuitton able to charge upwards of $5,000 for their canvas handbags, but keeps LeSportSac reasonably priced at around $100 for a handbag of similar quality? What keep Manolo Blahnik's leader pumps flying off the shelves at almost $900, but leaves Pleaser's leather pumps on the sale rake on Overstock.com, barely bringing in $50 a pair?

The answer is corporation value, which is determined by the day traders. Day traders are the lifeblood of the stock market, and allow the market to put a dollar value on the corporations that employ us, make the products that we eat, the things that we wear, and everything else that we use to make our lives easier. While it can be easy to think of established corporations as paradigms of culture, unable to be touched, the truth is that even the biggest conglomerate depends upon stock trading and day traders to place a value on their goods and services by adding depth and liquidity to the market. Day traders actively stock trading and placing value on our corporations give them an inherent value, which allows the companies that help make our daily lives easier to get the capital that they need to keep innovating and making our day-to-day workings easier than ever.

The most important thing that day traders provide when determining the fair value of stocks is the liquidity. Liquidity is not just the ability to sell an item, but the ability to sell it at a price that is considered fair. Going back to the example of luxury goods, anyone can sell an authentic Louis Vuitton handbag or pair of Manolo Blahnik pumps for $100, but this would not indicate a fair price because the market has determined that the products made by these companies are more valuable than their less-expensive alternatives.

So what does liquidity have to do with you if you're more interested in Forex trading? Well, if you're a citizen of the United States, you probably already know that 90% of the transactions on the Forex market are backed by the United States dollar. Have you ever wondered why this is? In short, it's because the dollar is considered to be one of the strongest currencies in the world, backed by an economy that consistently defies all odds and comes back stronger than ever when it is knocked down. Though fluctuations in the market may persist, the economy of the United States is considered the most reliable in the world thanks to the network of day traders constantly reassessing the value of each of their corporations and holding them to standards of productivity that helps place more value on the dollar. If you're involved in Forex trading based out of the United States, you owe a day trader a thank-you for handling the heavy lifting at home!

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