Why Forex Trading

Why Forex Trading

Trading in the foreign exchange market can be dynamic, exciting and lucrative. While investors have many options in the global investment and speculation marketplace, forex offers advantages over other types of speculative financial vehicles. Online forex trading has become very popular in the past decade because it offers traders several advantages:

Forex Never Sleeps

Trading goes on all around the world during different countries' business hours. you can, therefore, trade major currencies at any time, 24 hours per day. since there are no set exchange hours, it means that there is transactions. Actual foreign exchange trading is done by companies around the world every day in their normal course of business as they ship products to other countries. if a company in the us wants to buy a product from a company in Europe, they will usually need to exchange their us dollars for euros before the purchase. they can then pay the foreign company with euros and receive their order. this can be happening at almost any time of the day or night.

Go Long or Short

Unlike many other financial markets, where it can be difficult to sell short, there are no limitations on shorting currencies. if you think a currency will go up, buy it. if you think it will fall, sell it. this means there is no such thing as a "bear market" in forex - you can make (or lose) money any time.

Low Trading Costs

Most forex accounts trade without a commission and there are no expensive exchange fees or data licenses. the cost of trading is the spread between the buy price and the sell price, which is always displayed on your trading screen.

Unmatched Liquidity

Because forex is over $5 trillion a day market, with most trading concentrated in only a few currencies, there are always a lot of people trading. this makes it typically very easy to get in to and out of trades at any time, even in large sizes.

Available Leverag

e Because of the deep liquidity available in the forex market, you can trade forex with considerable leverage (up to 50:1). This can allow you to take advantage of even the smallest moves in the market. Leverage is a double-edged sword, of course, as it can significantly increase your losses as well as your gains.

International Exposure

as the world becomes more and more global, investors hunt for opportunities anywhere they can. if you want to take a broad opinion and invest in another country (or sell it short!), forex is an easy way to gain exposure while avoiding vagaries such as foreign securities laws and financial statements in other languages.

Immediate Order Execution and Price Certainty

Stock or futures transactions can take time to occur. from the moment that an order is placed, a transaction in futures or equities can take minutes or even hours to complete, depending on the technologies employed and the volume of trading in the marketplace. those delays can be challenging to the nerves and to the back account, since in the time that the order takes to execute (or "fill"), the equities or futures price might have changed substantially-a factor usually called slippage.in contrast, online forex transactions are usually immediate; they are effective as soon as the trade order is submitted by the click of a computer mouse. Because of that immediacy, the trade price is known at the time of the order. there is no surprising slippage, and seldom any of the uncertainty that accompanies stocks or futures orders.

Influence by Analysts Less Likely

In equities and stocks, industry and market pundits sometimes develop a large following of speculators. Those followers can represent a substantial amount of capital-enough to cause movements in smaller or less liquid markets. the huge size of the forex market-particularly in commonly-traded currencies-makes it resistant to pressures exerted by the followers of individual market analysts. The forex markets also provide a more subtle balance that helps curb influence and overt manipulation. This balance is provided through the responsiveness of the forex marketplace. When parties to a transaction have equal knowledge, both are more likely to be satisfied with the result. In the forex market, participants come closer to equal knowledge than in other markets because the market reacts quickly to events as they occur. the advantage of this characteristic is that any analysis that is flawed will not have an effect over a long period of time. any flaw will soon be revealed by the market action itself.

Speculation

Foreign exchange trading is also conducted for speculative reasons, like profiting from price fluctuations. This type of trading is conducted by both institutions and individual traders on a daily basis. if a trader or organization expects the euro to rise in value in relation to the us dollar they would make a trade on a euro/us dollar trading pair called eur/usd. this is not only buying Euros, but it is specifically trading euros against us dollars. It’s called going long on eur/usd. if the euro increases in value against the us dollar, the trader can end the trade resulting in an immediate profit. Changes in values are recorded in pips, which are 1/100th of 1 percent.

Foreign Exchange Pricing

Foreign exchange trading is conducted through a forex brokerage who receives prices from various banks over private networks. these networks are commonly called "the interbank". While the interbank is not an actual single network, but rather a reference to individual networks that trade between each other. the prices between these banks can vary widely at any given moment. Foreign exchange trading is now considered to be a common investment activity. Traders can trade against us dollars, Euros, British pounds, the Japanese yen, the Australian dollar, and many more. This type of trading was once reserved for banks and for the very rich, now a foreign exchange trading account can be opened with as little as $10 and some paperwork. Trading in the foreign exchange market can be dynamic, exciting and lucrative. While investors have many options in the global investment and speculation marketplace, forex offers advantages over other types of speculative financial vehicles.