Sunday, January 3, 2010

Why Trade the FOREX?

My purpose for writing this article is to demonstrate to you the advantages of trading on the Forex market. However, there is one myth that I want to dispel before I go further. The myth is that there is a difference between trading and investing. To dispel that myth I quote from Al Thomas, President of Williamsburg Investment Company, who wrote "If It Doesn't Go Up, Don't Buy It". He said "Everyone who invests is a trader, only the time period is different." It is a lesson that I took seriously after taking a beating in the stock market in 2000
Liquidity — The Forex market is the most liquid financial market in the world around 1.9 trillion dollars traded everyday.
Trading Times — The Forex market is open 24 hours a day (except weekends) which means that in the US it opens at 3:00 pm Sunday (EST) and closes Friday at 5:00 (EST), allowing active traders to choose the times they want to trade
Leverage — Depending on your Forex account size, your leverage may be 100:1, although there are Forex brokers that offer leverage of up to 400:1 (not that I would ever recommend that kind of leverage).
Trading costs — Transaction costs in the Forex market is the difference between the buy and sell price of each currency pair.
Trade execution — In the Forex market, trade execution is almost instantaneous. In both the equity and commodity markets, you count on a broker to execute your trades and their results are sometimes inconsistent.

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