7 Reasons to Trade Forex
By: Hillel Fuld
The Forex retail market is becoming more and more popular as time goes on, a phenomenon that begs the obvious question:” Why? What makes Forex so attractive to so many people?”
Here are a few suggestions to answer that question:
Size: Let's start with the most obvious. The size of the Forex market is unprecedented and unmatched by any other global market. The astronomic number of anywhere between 2 and 5 trillion dollars is what is estimated to be traded daily in the Forex market. This characteristic of the Forex market is what probably causes the initial attraction to new traders. What keeps them interested are the following 6 features.
- Accessibility: The Forex market, as opposed to any other market, is open around the clock. No need to wait for this institution or the other to open. You can trade currencies from the comfort of your own at any time during the day, something that makes Forex trading a simple and basic task for the retail trader. This is of course magnified by the internet and the constant access tothe worldwide web from anywhere on the globe.
- Equality: This is a direct result of its size. As opposed to other markets, the Forex market is so huge, it cannot be effected by one individual person or institution. So, the retail trader, for all intents and purposes, is on the same "level" as the largest bank when it comes to Forex trading. The Forex market cannot be manipulated.
- Leverage: Here is a tricky one. The Forex market has a very unique characteristic in terms of what it offers the simple trader. You do not need huge amounts of money to be able to trade huge amounts of currency. Almost all Forex brokers today offer a minimum of 100:1 leverage on your investment. The reason this is tricky is this can also be a huge down side of the Forex market. The opportunity to gain using leverage is equal to the risk of loss.
- Volatility: The Forex market rarely stands still. Not only is it always moving, it is making large movements. Large volume transactions and high liquidity combined with fewer trading instruments generate greater intra-day volatility in the currency market that can be exploited by day-traders. Volatility for the most liquid stocks are between 60 to 100. Volatility for currency trading is approximately 500, another very attractive feature for anyone who wants to make quick and easy profits.
Profitability: Besides the obvious potential for profit in Forex trading, there is also another element that is exclusive to Forex. You can profit no matter which direction the market is going. As opposed to the stock market, in which you can only profit when your stock's worth goes up, in Forex there is a lot of money to be made even when your currency is going down. The Forex market is a two way market, you are always working with pairs, so if one currency is decreasing, that simply means another is increasing. There is always the possibility to profit in the world of Forex.
- Transparency: This is always an advantage when considering an investment. Are you faced with the danger of being surprised by this event or another that will have an effect on the market and its movements? With the Forex market, what you see is what you get. Analyze the news, read the charts, there are no surprises. If you know what you are doing, you can predict the direction of the market, with relatively high percentage accuracy.
8 Things to Look for When Choosing a Forex Broker
Forex Trading Analysis: What Is It & How Do I Choose?