On this page you will learn why trade forex. The foreign exchange market (Forex, FX, or currency market) is a global decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock. The Forex market determines the relative values of different currencies. Forex market has been referred to as the market closest to the ideal of perfect competition, notwithstanding currency intervention by central banks.
- With volume of over $4 trillion per day, Forex is the largest financial market in the world Forex market is 3 times larger than global stock market. Until recently, due to large minimum deal sizes and strict financial requirements, Forex market was not available for individual investors.
- Market transparency and instant execution Market transparency is much greater in Forex than in stocks or commodities, since economic reports and news announcements that drive Forex quotes are publicly available and accessible for everybody.
- High levels of liquidity This liquidity mainly comes from the banks which offer currency exchange services to large multinational companies and investors. With such liquidity, even the largest of transactions are conducted within milliseconds. Major players in Forex markets are: Deutsche Bank, Barclays Capital, UBS AG and Citibank.
- Markets are open 24 hours a day, 5 days a week Forex trading: is available 24 hours a day, 5 days a week allowing traders access during all Forex market trading times. You can trade from Sunday 21:05 (GMT) to Friday 21:00 (GMT).
- Narrow Spreads
Spreads, the difference between the bid and offer price, are very small in Forex. Just compare a 1-pip spread in EURUSD with a spread in most active and liquid stocks. Furthermore, FX prices are typically ‘good’ for far larger amounts than in equity.
- High leverage and low margin requirements Leverage in Forex trading can be as high as 1:500. This means that you can trade $100 000 worth of currency for only $200, or 0.2%. To compare this, stock traders typically must post at least 50% margin or to trade $100 000 worth of stock they must invest $50 000 as margin. Leverage can be a double-edge sword, however, as an increase in leverage leads to an increase in risk but also in profit potential.
- Price movements are predictable Forex currency pairs generally spend more time in very strong up or down trends than other markets and there are a number of repetitive patterns that are easily recognizable. For a Forex trader, this is a huge advantage because it is generally much easier to trade a strongly trending market than a chaotic market.
- Equal opportunities to profit in rising or falling markets The Forex market has no directional bias as do most stock markets. For example, most stock markets have a bullish bias, this means that traders tend to focus more on the upside of the market. This is not the case in the Forex market. In Forex market it is equally easy to buy or sell at anytime and there is never any increased fee for selling short.
- Mini and micro accounts make it easy to get started You don’t have to be a millionaire to get access to Forex market. In fact, with most brokers you can get started with as little as $100. Small position size allows you to limit your risks.
- Easily accessible market through internet Forex market is easily accessible through the internet. In fact, most of our retail Forex traders are trading either from the comfort of their home, at work or even while on vacation.
Edited by Ingmar Mattus