Why Trade The Forex


Why Trade The Forex

Why Trade the​ FOREX?
My purpose for​ writing this article is​ to​ demonstrate to​ you the​ advantages of​ trading on the​ FOREX market .​
However, there is​ one myth that I​ want to​ dispel before I​ go further .​
the​ myth is​ that there is​ a​ difference between trading and​ investing .​
To dispel that myth I​ quote from Al Thomas, President of​ Williamsburg Investment Company, who wrote if​ It Doesn’t Go Up, Don’t Buy It .​
He said Everyone who invests is​ a​ trader, only the​ time period is​ different .​
It is​ a​ lesson that I​ took seriously after taking a​ beating in​ the​ stock market in​ 2000.
So now, let’s compare features of​ currency trading to​ those of​ stock and​ commodity trading .​

Liquidity - the​ FOREX market is​ the​ most liquid financial market in​ the​ world around 1.9 trillion dollars traded everyday .​
The commodities market trades around 440 billion dollars a​ day, and​ the​ US stock market trades around 200 billion dollars a​ day .​
This ensures better trade execution and​ prevents market manipulation .​
It also ensures easily executable trading.
Trading Times – the​ FOREX market is​ open 24 hours a​ day (except weekends) which means that in​ the​ US it​ opens at​ 3:00 pm Sunday (EST) and​ closes Friday at​ 5:00 (EST), allowing active traders to​ choose the​ times they want to​ trade .​
Commodities trading hours are all over the​ board depending on which commodity you are trading .​
Including extended trading times US stocks can be traded from 8:30 am to​ 6:30 pm (ET) on weekdays.
Leverage – Depending on your FOREX account size, your leverage may be 100:1, although there are FOREX brokers that offer leverage of​ up to​ 400:1 (not that I​ would ever recommend that kind of​ leverage) .​
Leverage in​ the​ stock market can be as​ high as​ 4:1, and​ in​ the​ commodities market, leverage varies with the​ commodity traded but it​ can be quite high .​
Because the​ commodity markets are not as​ liquid as​ the​ FOREX market, its leverage is​ inherently riskier .​
Although I​ was never shut out of​ a​ commodity trade by the​ day limit, the​ fear was always in​ the​ back of​ my mind.
Trading costs – Transaction costs in​ the​ FOREX market is​ the​ difference between the​ buy and​ sell price of​ each currency pair .​
There are no brokerage fees .​
for​ both the​ stock and​ the​ commodity markets, there are transaction costs and​ brokerage fees .​
Even when you use discount brokers, those fees add up.
Minimum investment – You can open a​ FOREX trading account for​ as​ little as​ $300.00 .​
It took $5,000 for​ me to​ open my futures trading account .​
Focus – 85% of​ all trading transactions are made on 7 major currencies .​
In the​ US stock market alone there are 40,000 stocks .​
There are just over 200 commodity markets, although quite a​ few are so illiquid that they are not traded except by hedgers .​
as​ you can see, the​ fewer number of​ instruments allows us to​ study each one more closely .​
Trade execution – In the​ FOREX market, trade execution is​ almost instantaneous .​
In both the​ equity and​ commodity markets, you count on a​ broker to​ execute your trades and​ their results are sometimes inconsistent.
While all of​ these features make trading the​ FOREX market very attractive, it​ still requires a​ lot of​ education, discipline, commitment and​ patience .​
All trading can be risky.






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