Why Trade Forex ?

Foreign exchange is the backbone of all international capital transactions. Compared to the slim profit margins rendered in other areas of commercial banking, huge profits can be produced in a matter of minutes from minor currency market movements.

	Advantages of trading foreign exchange
	24-hour trading FX is a true 24-hour market, which offers a major advantage over stock and futures trading. Whether it's 6pm or 6am, somewhere in the world there are always buyers and sellers actively trading foreign currencies. Traders can always respond to breaking news immediately, and P&L is not affected by after hours earning reports or analyst conference calls. After hours trading for U.S. stocks and futures brings with it several limitations. ECN's (Electronic Communication Networks), also called matching systems, exist to bring together buyers and sellers - when possible. However, there is no guarantee that every trade will be executed, nor at a fair market price. Quite frequently, traders must wait until the market opens the following day in order to receive a tighter spread. Superior liquidity With a daily trading volume that is 50x larger than the New York Stock Exchange, there are always broker/dealers willing to buy or sell currencies in the FX markets. The liquidity of this market, especially that of the major currencies, helps ensure price stability. Traders can almost always open or close a position at a fair market price. Because of the lower trade volume, investors in the stock market and other exchange-traded markets are more vulnerable to liquidity risk, which results in a wider dealing spread or larger price movements in response to any relatively large transaction. Up to 200:1 Leverage High leverage is commonly available from online FX dealers, which substantially exceeds the common 2:1 margin offered by equity brokers, and 15:1 in the futures market. At 100:1, traders post $1000 margin for a $100,000 position, or 1%. “Increasing leverage increases risk.” The most effective way to manage the risk associated with margined trading is to diligently follow a disciplined trading style that consistently utilizes stop and limit orders. Devise and adhere to a system where your controls kick in when emotion might otherwise take over. Lower transaction costs It is much more cost-efficient to trade FX in terms of both commissions and transaction fees. Some FX trading firms charge NO commissions or fees whatsoever, while still offering traders access to all relevant market information and trading tools. "Saletlx.com is compensated through the bid/ask spread". In contrast, commissions for stock trades range from $7.95-$29.95 per trade with online discount brokers up to $100 or more per trade with full service brokers. An average commission on a futures trade is $15 a round turn. Another important point to consider is the width of the bid/ask spread. Regardless of deal size, FX dealing spreads are normally 6 pips or less (a pip equals .0001). In general, the width of the spread in a FX transaction is less than 1/10 that of a stock transaction, which could include a .125 (1/8) wide spread. And in the futures market, spreads are typically 7 pips or wider. As a rule of thumb, one pip equals $10, which means at 7 pips, a futures trade costs approximately $20 more than a comparable trade in the spot FX market. Trading Opportunities in rising and falling markets In every open FX position, an investor is long in one currency and short the other. A short position is one in which the trader sells the base currency in anticipation that it will depreciate. This means that potential exists in a rising as well as a falling market. The ability to sell currencies without any limitations is another distinct advantage over equity trading. In the US equity markets, it is much more difficult to establish a short position due to the Zero Uptick rule, which prevents investors from shorting a stock unless the immediately preceding trade was equal to or lower than the price of the short sale. "Forex trading involves substantial risk of loss and is not suitable for all investors.".