finance, foreign exchange, exchange
Trading in the foreign exchange market can be dynamic, exciting and lucrative. While investors have many options in the global investment and speculation marketplace, forex offers advantages over other types of speculative financial vehicles.
The profit potential is why participants enter the market. But why would a speculator choose to trade forex instead of equities or futures?
Forex offers several advantages over speculative trading in futures, stocks and other equities. Eight major currency pairs dominate most currency trading, so it is a much simpler market to follow for most traders. The vast majority of trades involve the United States Dollar, while the Euro, British Pound and Japanese Yen are also widely traded.
In some ways forex trading is much like stock trading. Buying stocks and other equities for the long term is an investment. Buying the same products to profit from short term price movement is speculation. Most often, traders trade foreign currency in the forex market for speculative reasons that can be compared to the short term purchase of stocks or other equities. Most often, the goal of forex traders is to buy currencies, hold them for a short period, and then sell them with the intent of profiting by favorable changes in price.
Whereas futures, and especially stocks and other equities are usually only traded during business hours, forex is traded in a 24 hour market. Investors can participate in the market at any time, 24 hours per day, excluding only a short period on weekends. If you have Internet access your Forex Broker can connect you immediately to your trading platform, allowing you access from anywhere in the world at any time.
Forex trading occurs around the globe in countless locations, and not in centralized exchanges such as are used for futures and equities trading. While large financial and commercial institutions might dominate other markets, the size and decentralized nature of the forex market makes it more difficult to manipulate. Even the Central Banks of large nations usually do not have the capital to influence forex markets directly (although it is important to understand that Central Banks can influence currency rates through other means, such as through monetary policy and interest rates).
This large size also means that forex is almost a pure market, in an economic theory sense, with each party entering the market on equal terms. This makes meaningful analysis of the market more likely, as economic models and technical analyses are more easily applied to this orderly market.
Forex is an exciting and dynamic investment tool, but the same precautions apply as with any market. Risk can be mitigated using the proper tools, sound trading practices and discipline. Learn about the market, be aware of the risks and ensure you are willing to take those risks before you trade.
, foreign currency exchange
, foreign exchange
, Forex Trading
, Trading Platform