Understanding The Advantages Of Forex Trading

By Richard M. Davieess

Why trade in FOREX? Because FOREX trading offers unrivaled advantages no matter what the prevailing market conditions or stage of the business cycle. No other market can match the cash/spot FOREX market's unique character. When you are trading on the FOREX you have going for you an unmatched set of conditions that contribute to your success.

The FOREX runs 24 hours a day, five days a week. Think of it: the market is never closed during that time! Thus a FOREX trader can make a move at the most advantageous time possible. No waiting for the New York Stock Exchange or NASDAQ to open.

A trader in FOREX can make any move they need to, into or out of the market, in all types of market conditions because the FOREX is the world's most liquid market. Trading is non-stop, with minimal execution barriers or risk and with no limit on daily trading.

The FOREX market has a high leverage ratio. Although there is always the possibility to lose, with a leverage ratio of four hundred, there is also a huge potential to make enormous profits. Compare that with a leverage ratio of two in the equity markets.

The costs per transaction are very low. The retail transaction price is actually lower than 0.1% under typical conditions. That's just one tenth of one percent. At larger dealers, the spread may be below five pips, and may expand by a large amount when the market is moving quickly.

The FOREX market is always a good market. To state it simply, a FOREX market trade involves trading one currency for another. The outlook of a currency defines whether there will be a bull market or a bear one. A bull market means the outlook is good, and the investor will make gains by buying that currency against others. A bear market, on the other hand, means the outlook on a particular currency is not good, but the investor can still benefit by selling short with the hope of buying the currency back at a lower price.

The FOREX market is an inter-bank market. The FOREX market is a global one, consisting of a world wide network of dealers who communicate with their customers electronically or by phone. Unlike the equity markets which has the New York Stock Exchange, there is no central location for the FOREX market.

Given the large, decentralized nature of the FOREX, no one institution, not even a national bank, much less a single trader, can corner the market or control market prices for an inordinate length of time.

The FOREX market is not directly regulated. Although considered an unregulated market, the operations of commercial banks and other major players must still follow the banking laws set forth by government regulators. This helps keep things fair for all investors.

It is important to understand that protections for investors still exist in the marketplace. With its high profit potential, flexibility, convenience, and reliability in all market conditions, the FOREX market is an excellent choice for the average trader. Its openness and diversity allows for a greater potential for profit than many of the other types of markets.