Why Trade the Forex?

In today’s financial markets, whether you are a small or large investor, the Foreign Exchange Market is the most profitable sector for your investments.

Unlike other financial markets like a country's stock exchange for example, the Forex market has no physical location. It operates through electronic networks of banks, computer terminals or by telephone for the office trader.

The Forex market operates 24 hour per day, the trading session spanning from one time zone to another across the world's major financial centers (From Hong Kong, to Tokyo, Sydney, Frankfurt, London and New York). In every financial center there are  day traders who buy and sell currencies 24 hours a day during the business week.

The trading session starts in the Asia, in New Zealand (Wellington), then Sydney, Tokyo, Hong Kong, Singapore, Moscow, Frankfurt, London and ends in New York and Los Angeles.

Liquidity

As Forex is the largest financial market in the world, with the equivalent of USD 4+ trillion being traded daily, whereas the volume of the stock markets is only around $500 billion worldwide.

Flexibility

Because of 24 hour trading, traders of the Foreign Exchange Market do not have to wait for a reaction to certain external events in the same way as other daily markets (stock or futures markets, for example).

In these other markets, it is normal for prices at the “open” of the next day to “gap” up or down from the previous day’s closing prices because, by morning of whatever time zone you are in, the opening price will have already factored in the impact of any relevant overnight events.

Lower transaction costs

The Forex market has no commissions, other than "spread costs" - which is the difference between the bid and ask prices.

Price stability

High liquidity helps ensure price stability when unlimited contract sizes can be executed at a fair price. It helps avoid the problem of instability, as happens in the stock market and other exchange-traded markets because of the lower trade volumes where, at any given price, only a limited number of contracts can be executed.

Margin Size

Margin size for trading on the Forex is defined in the contract entered between a trader (client) and a brokerage company, which provides opportunity for individual traders to enter the currency market, usually with a capital requirement of just 1% of the contract value.

So, starting a trading account with a 1000 US dollars allows a trader to enter trades of USD100,000. Such high leverage, combined with the rapid rate fluctuations make this market extremely profitable but at the same time very risky for the trader, should the trade entered go against him.