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Forex Training Course: Why Currency Trading?
from:Before starting with a forex training course, it is wise to ask yourself why you even want to get involved with forex trading. It's true that it can be very profitable but it can also be very risky. There are other ways of making money. There are also other markets for speculative trading, such as the stock market.
So what makes the forex market special, and why might you want to become a currency trader rather than any other kind of financial trader? Here are just a few of the reasons.
High Liquidity
One definition of the liquidity of a commodity is that it is a measure of how easily it can be converted to cash without affecting the value. Currencies are already cash so currency is more liquid than any other commodity.
Besides that, when talking about liquidity, traders are often referring to the value being traded in the market. A market with a high turnover is considered more liquid. The average daily turnover in foreign exchange is almost $4 trillion (survey by Bank For International Settlements, December 2007). This is more money than most people can even imagine, and it is considerably more than is traded on all of the stock markets of the world combined.
All of these factors make it very easy to trade currency and get the price that you see or want. They also mean that it is very difficult for anybody to rig the markets or manipulate prices through insider trading.
Huge Leverage
Leverage is the ability to control a large amount of something with a much smaller amount. In trading, this refers to trading on margin, where you invest a small amount of money in your broker account and use it to control much larger sums. In effect, your broker loans you the larger amount, although they may or may not actually put the money into the market depending on their business model.
In forex trading you can commonly command 100 times leverage and sometimes 200 times your investment. This is much more than you would be offered with stock trading and reflects the liquidity of the market and the brokers' ability to apply stops. This is what gives forex trading its unmatched ability to make big profits from small investment funds.
Prices Are Relative
When the value of one currency falls, others will rise because they have no absolute value. They are all relative to each other. You can trade a currency pair in both directions: going long if you think its value will rise, and going short if you think it will fall.
This is very different from the stock market where a major crash can mean that almost all stocks drop in value at the same time. All you can do in a stock market crash is get out. But in the forex markets, it is not possible for all currencies to fall simultaneously, so you can simply trade in the other direction.
24 Hour Trading
One of the first things you will learn in any forex training course is that this is a 24 hour market on business days. You are not limited to the business hours of any one country. Currencies can be traded in any time zone. So you can trade any time of day to suit yourself. You only have to stop at the weekend.
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