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Jun 29 2009

Foreign Exhhange: What Attracts People To Trade Currencies?


Trading currencies in Forex is becoming more and more popular.We always see those advertisement about Forex. The question is: why Forex trading is becoming more and more popular? Firs reason is of course the size and volume of the market being traded on daily basis. Below is the list of reasons that make many people seriously consider joining the currency trading Market.And why you need to learn Forex trading

High Return on Investment

What attracts people at first place is potential of making a lot of money with little investment. That became possible because brokers now offer trading with leverage. It is the leverage that allows people like you and me with small funds to trade currencies in such a big market.

People who open their accounts with retail brokers trade currencies with leverage. Leverage of 100 or even 200 is what normally offered by most brokers. Depositing only small amount of money into your trading account allows you to control lot sizes 100 or even 200 times larger than your investment.

Forex is the Largest Market

I mentioned before that Forex is one of the largest markets in the World. Currencies of equivalent to $4 trillion are being exchanged on average day. Unlike stocks or futures exchange Forex does not have the central exchange. However the big members of exchange like banks or other financial institutions are located in New York, London and Tokyo.

Instant Trade Execution

If you tried trading Forex even on a demo account you saw that orders are executed instantly. That's called liquidity. There always will be an order that is opposite to yours to get them executed quickly.

Currencies are Being Traded Around the World

Another unique feature of Forex it involves currencies of different countries by definition. That makes it a global market. Therefore if you are not sure in economic situation of one country you can switch to trading currency pair of other countries. For example I personally like to trade AUD/NZD since the economies of Australia and New Zealand are related and you don’t see very large moves. It makes it less profitable but it reduces the risk also.

It is Open 24 Hours 5 Days a Week

Since it is a global market the time when currencies are traded travels with the Sun from one country to another. That makes Forex open 24 hours a day. It closes only on weekends. Therefore you can choose your own time to trade. Also you can chose the time of volatility that you prefer. New York session is highly volatile and unpredictable for USD crosses. London session is also volatile but more predictable. And Asian session goes with much less volatility for US dollar pairs.



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