NEWS FUSE

Historically, the Forex market was available most to major banks, multinational corporations and other participants who traded in large transaction sizes and volumes. Small-scale traders including individuals like you and I, had little access to this market for a long time. Now with the advent of the Internet and technology, Forex trading is becoming an alternative investment increasingly popular for the general public.

Continuous Trading 24 hours

The foreign exchange market is open 24 hours. You may decide to trade after arriving home from work . Regardless of what time - frame you want to trade at any time of the day , there will be enough buyers and sellers to take the other side of your trade. This feature of the market gives you enough flexibility to manage their operations around your daily routine.

Liquidity and efficiency

When a large number of buyers and many sellers , you can expect to buy or sell at a price that is very close to the last market price . The Forex market is the most liquid market in the world. Trading volume in the currency markets can be between 50 and 100 times larger than the Stock Exchange of New York.

When you are trading stocks, it is possible that events experienced in a news accelerates or decelerates the price of the underlying stock you have swallowed. Perhaps a director has been kicked out by the shareholders of a company or the company has just launched a new product and big investors are buying the shares of a particular company. Share prices can be drastically affected by the actions or in actions of one or a few individuals. So if you are relying on television reports and newspapers to get your news , most of the opportunities or warnings will have come too late for you to take advantage by the time you receive them .

The value of currencies on the other hand is affected by many factors and many participants that the likelihood that an individual or group of individuals drastically affecting the value of a currency is minute . Due to its large size, the currency market is hard to manipulate. The ability of people to engage in ' insider trading ' is virtually eliminated. As an average trader , is less favored. It is likely to be played on relatively equal ground together with other traders and investors whom you are competing against.

Note about price differences

For those who already traded other markets , you probably know about "gaps " price. "Gaps ' occur when prices ' jump ' from one price level to another without having taken any incremental measure to get there. For example , trade can be a part that closes at $ 10 at the end of the day, but due to some event that happens overnight , it opens tomorrow at $ 5 and continues to go downwards for the rest of the day .

Gaps achieve another degree of uncertainty that may interfere with the strategy of a trader. Probably one of the most worrying aspects of this is when a trader uses stop - losses. In this case , if a trader puts a stop-loss at $ 7 because he no longer wants to be in a trade if the share price reaches $ 7 trade will remain open overnight and the trader wakes morning with a greater loss of what may have been prepared .

After seeing a couple of Forex charts , you will notice that there are " gaps" little money or none at all , especially in the charts long term , such as three hours or four hours daily charts .

volatility

 Forex Trading opportunities exist when prices fluctuate . If you buy a stock for $ 2 and it stays there , no chance to make a profit . The magnitude of level of this fluctuation and its frequency is known as volatility. As a trader, volatility is seized. 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 . The high volatility of the currency market indicates that a trader can potentially earn 5 times more money with Forex trading trading the most liquid shares .

Volatility is a measure of maximum return that a trader can generate with perfect foresight . The volatility of the most liquid stocks are between 60 and 100. Volatility for currency trading is 500. ( Source : . Oanda )

In this respect , currencies make a better trading vehicle for day traders equity markets .

Low transaction costs

A currency transaction typically incurs no commission or transaction fees. For a Forex trader , the spread is the only cost you need to cover in taking a position. In addition , due to the efficiency of the Forex market , there is little or no slippage costs .

' Slip ' is the cost involved when traders enter the market at a price worse than the level they wanted to enter. For example, a trader wants to buy a stock at $ 2.00 but by the time the order is executed , his gets to buy the shares at $ 2.50. That fifty cents difference is his slippage cost . Cost slip affects large-volume traders a lot. When they buy large quantities of a commodity, a glut in the market with purchase orders. This applies a pressure for the price to rise . By the time they get to buy all the quantities they wanted, the average price of their products would be higher than the price they intend to get it . Conversely , when they sell large quantities of a commodity, that oversupply the market with sell orders. This applies a pressure for the price to drop . By the time you finish selling all their products, their average selling price is lower than initially intended to sell them .

Due to lower transaction costs , minimum slippage and strong intra volatility - day , individuals can trade frequently at a small cost . As an approximation, can only expect to have a spread of 0.03 % of your position size . To give an example , you can buy and sell $ 10,000 and this will only have to pay a margin of 3 points , equivalent to $ 3.

Leverage

There are a lot of banks or people who would lend money so you can use it to trade shares . And if not, would be very difficult for you to convince them to invest in you and in your idea that a certain share is going to go up or down. Therefore, most of the time, if you have a $ 10,000 account , you can only really afford to buy $ 10,000 in shares.

In currency trading however, because you use ' borrowed money ' , you can trade 10,000 for a coin and only take place between fifty (For a margin lending ratio of 200:1 ) to two hundred dollars (For a ratio of margin lending 50 : 1 ) in your trading account . This makes it possible for an average trader with a small trading account , under $ 10,000 to benefit sufficiently from the movements of exchange rates. This concept is explained later in the part-time currency trader.

Benefit of a bull and bear market

When you are trading shares can only be exploited when the price of a stock rises. When you suspect that it is going down or they are just going to move sideways , then all you can do is sell your shares and stand aside . One of the frustrations of trading shares is that an individual can not profit when prices are falling. In the currency market , it is easy for you to trade a currency downward so that you can profit when you think you will lose value . This is easy to do because currency trading simply involves buying one currency and selling another , there is no structural bias that makes it difficult to trade 'downwards ' . Therefore, the Forex market is sometimes referred to as the eternal bull market .

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