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Why Trading
FOREX?
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The cash/spot FOREX markets possess certain
unique attributes that offer unmatched potential for profitable trading
in any market condition or any stage of the business cycle:
A 24-hour market: A trader may take advantage of all profitable market
conditions at any time; no waiting for the 'opening bell'.
Highest liquidity: The FOREX market with an average trading volume of
over $1.5 trillion per day is the most liquid market in the world. That
means that a trader can enter or exit the market at will in almost any
market condition minimal execution barriers or risk and no daily trading
limit.
High leverage: A leverage ratio of 50 to 100 is typical compared to a
leverage ratio of 2 (50% margin requirement) in equity markets. Of
course, this makes trading in the cash/spot forex market a double-edged
sword the high leverage makes the risk of the down side loss much
greater in the same way that it makes the profit potential on the upside
much more attractive.
Low transaction cost: The retail transaction cost (the bid/ask spread)
is typically less than 0.1% (10 pips or points) under normal market
conditions. At larger dealers, the spread could be less than 5 pips, and
may widen considerably in fast moving markets.
Always a bull market: A trade in the FOREX market involves selling or
buying one currency against another. Thus, a bull market or a bear
market for a currency is defined in terms of the outlook for its
relative value against other currencies. If the outlook is positive, we
have a bull market in which a trader profits by buying the currency
against other currencies. Conversely, if the outlook is pessimistic, we
have a bull market for other currencies and a trader profits by selling
the currency against other currencies. In either case, there is always a
bull market trading opportunity for a trader.
Inter-bank market: The backbone of the FOREX market consists of a global
network of dealers (mainly major commercial banks) that communicate and
trade with one another and with their clients through electronic
networks and telephones. There are no organized exchanges to serve as a
central location to facilitate transactions the way the New York Stock
Exchange serves the equity markets. The FOREX market operates in a
manner similar to the way the NASDAQ market in the United States
operates, and thus it is also referred to as an 'over the counter' or
OTC market.
No one can corner the market: The FOREX market is so vast and has so
many participants that no single entity, even a central bank, can
control the market price for an extended period of time. Even
interventions by mighty central banks are becoming increasingly
ineffectual and short-lived, and thus central banks are becoming less
and less inclined to intervene to manipulate market prices.
Unregulated: The FOREX market is generally regarded as an unregulated
market although the operations of major dealers, such as commercial
banks in money centers, are regulated under the banking laws. The
conduct and operation of retail FOREX brokerages are not regulated under
any laws or regulations specific to the FOREX market, and in fact many
of such establishments in the United States do not even report to the
Internal Revenue Service (IRS). The currency futures and options that
are traded on exchanges such as Chicago Mercantile Exchange (CME) are
regulated in the way other exchange-traded derivatives are regulated.
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