Foreign Exchange (FX)
Benefits of Forex Trading
Individual investors now have the opportunity to trade the largest, most liquid financial market in the world and potentially enjoy any financial advantages. People all around the world are discovering the many advantages of trading the Forex market as a business. Here are just a few:
24 Hr Access
The Forex market never sleeps. It opens every Sunday at 4PM EST and runs continuously through Friday 4PM EST. The whole world participates in this market. When we are going to sleep, Sydney and Hong Kong are waking up, then Frankfurt, London and back to New York. This is ideal for the individual who wants to trade the Forex market part-time because they can choose when they want to take advantage of profitable market conditions according to their specific level of risk.
Liquidity
With potentially $3.2 trillion changing hands every day, the Forex market is extremely liquid. Whether it's 6PM or 6AM, somewhere in the world there are always buyers and sellers actively trading foreign currencies. With the click of a mouse you can buy or sell. All trades settle in cash.
Leverage
Forex investors are able to trade foreign currencies on a highly leveraged basis - up to 400 times their investment. For example, an investment of $300 would allow a trader to control up to $120,000 of any particular currency. Leverage gives the trader the potential to rapidly increase the size of his account but the high degree of leverage that is often obtainable in Forex trading can also work against you as well as for you. The use of such high leverage may lead to large losses as well as gains-trade at your own risk.
Opportunity in both rising and falling markets
Currencies trade in pairs; a country's currency has value only relative to the currency of another country. The most popular currency pair is the EUR/USD pair. When you go long (buy) the EUR/USD pair, you are buying the Euro and simultaneously selling the US Dollar. When you go short (sell) the EUR/USD pair, you are selling the Euro and simultaneously buying the US Dollar. If you begin your trade by buying the EUR/USD pair, you close out your trade by selling the EUR/USD pair and vice-versa. It is just as simple mechanically to trade by shorting a currency pair as it is going long so you can profit or lose in both rising and falling markets.
Low Transaction Cost
It is much more cost-efficient to trade the Forex market than other markets. There are no brokerage commission fees in the Forex market. The only fee is the spread which is the difference between the bid and asked price for the currency pair. The spread cost can be as low as 1-2 pips.