Forex Trading Guide                       Bookmark This Page

Welcome to Forex Trading Guide

Article

The 6 Advantages Forex Trading Has Over Other Investments
David Morrison

There are many different advantages to trading forex instead of futures or stocks, such as:

1. Lower Margin

Just like futures and stock speculation, a forex trader has the ability to control a large amount of the currency basically by putting up a small amount of margin. However, the margin requirements that are needed for trading futures are usually around 5% of the full value of the holding, or 50% of the total value of the stocks, the margin requirements for forex is about 1%. For example, margin required to trade foreign exchange is $1000 for every $100,000. What this means is that trading forex, a currency trader's money can play with 5-times as much value of product as a futures trader's, or 50 times more than a stock trader's. When you are trading on margin, this can be a very profitable way to create an investment strategy, but it's important that you take the time to understand the risks that are involved as well. You should make sure that you fully understand how your margin account is going to work. You will want to be sure that you read the margin agreement between you and your clearing firm. You will also want to talk to your account representative if you have any questions.

The positions that you have in your account could be partially or completely liquidated on the chance that the available margin in your account falls below a predetermined amount. You may not actually get a margin call before your positions are liquidated. Because of this, you should monitor your margin balance on a regular basis and utilize stop-loss orders on every open position to limit downside risk.

2. No Commission and No Exchange Fees

When you trade in futures, you have to pay exchange and brokerage fees. Trading forex has the advantage of being commission free. This is far better for you. Currency trading is a worldwide inter-bank market that lets buyers to be matched with sellers in an instant.

Even though you do not have to pay a commission charge to a broker to match the buyer up with the seller, the spread is usually larger than it is when you are trading futures. For example, if you were trading a Japanese Yen/US Dollar pair, forex trade would have about a 3 point spread (worth $30). Trading a JY futures trade would most likely have a spread of 1 point (worth $10) but you would also be charged the broker's commission on top of that. This price could be as low as $10 in-and-out for self-directed online trading, or as high as $50 for full-service trading. It is however, all inclusive pricing though. You are going to have to compare both online forex and your specific futures commission charge to see which commission is the greater one.

3. Limited Risk and Guaranteed Stops

When you are trading futures, your risk can be unlimited. For example, if you thought that the prices for Live Cattle were going to continue their upward trend in December 2003, just before the discovery of Mad Cow Disease found in US cattle. The price for it after that fell dramatically, which moved the limit down several days in a row. You would not have been able to leave your position and this could have wiped out the entire equity in your account as a result. As the price just kept on falling, you would have been obligated to find even more money to make up the deficit in your account.

4. Rollover of Positions

When futures contracts expire, you have to plan ahead if you are going to rollover your trades. Forex positions expire every two days and you need to rollover each trade just so that you can stay in your position.

5. 24-Hour Marketplace

With futures, you are generally limited to trading only during the few hours that each market is open in any one day. If a major news story breaks out when the markets are closed, you will not have a way of getting out of it until the market reopens, which could be many hours away. Forex, on the other hand, is a 24/5 market. The day begins in New York, and follows the sun around the globe through Europe, Asia, Australia and back to the US again. You can trade any time you like Monday-Friday.

6. Free market place

Foreign exchange is perhaps the largest market in the world with an average daily volume of US$1.4 trillion. That is 46 times as large as all the futures markets put together! With the huge number of people trading forex around the globe, it is very hard for even governments to control the price of their own currency.

About The Author

David Morrison gives you a handy, easy to understand intro to the wonderful, profitable world of forex trading. This article is free to publish - more information can be found at http://www.ForexTrader123.com.

Forex trading News

Forex trading

NEW YORK -- Caution returned to Wall Street Monday as investors gave back some gains from last week's rally even as they found some encouragement from President-elect Barack Obama's calls for an economic stimulus package. The Dow fell 81.80, or 0.91 ...

Investors retreat, Dow falls - Detroit News

TOKYO, Jan 6 (Reuters) - Japan's Nikkei average rose 0.3 percent on Tuesday, buoyed by exporters such as Canon Inc on a weaker yen and hopes for economic stimulus steps by the U.S. administration taking office later this month. Toyota Motor Corp ...

Nikkei up 0.3 pct on yen, hopes for US econ steps - CNBC

The EURUSD plunged 300+pips during the previous trading day as market participants expect the European Central Bank to continue their easing cycle, and the euro will remain on the defensive over the near-term as investors expect the central bank to ...

Short-Term Forex Technical Outlook: EUR/USD - DailyFx

Jan 06 - Forex Market Update: Dollar Extends Gain Against Euro and Pound Jan 06 - Overnight Interest Rate Update 01.06.09 Jan 05 - Euro Tumbles on Dovish ECB Comments, Euro-zone CPI Could Exacerbate Sentiment on Tuesday Jan 05 - British Pound Shows ...

Forex Market Update: Dollar Extends Gain Against Euro and Pound - DailyFx

An increasing number of people are now turning to forex trading as a means of generating revenue. However there is a lot to learn, so with that in mind, here are some of the basics you should know before you even think about trading forex with real ...

A Few Things You Need To Know About Forex Trading - Best Syndication

Rate drops to new lows in early New York today, aggressive liquidation by EURO-Sterling cross spreaders likely providing the main selling. Late longs are under pressure and can't ignore a break of the 50% fib defense numbers. Bears took a stand at 1 ...

EURO USD Forex Trading Tips and Analysis for Day Traders - Top News India

A couple weeks ago I wrote a piece that compared the Spot Forex market to the Forex Futures. It recently dawned on me that the piece was really written to an audience that already has some knowledge of Forex. Today, let's discuss the basics of this ...

A Basic Understanding of the Forex Markets - FXStreet.com

Veteran Turtle Trader, Russell Sands, Will Auto-Trade For You. $6K Minimum. 100% Guaranteed. Automate Your FOREX Trading and Explode Your Profits TODAY! Double Your Money Each and Every Month. FAP Robot Eliminates the Guess Work in FOREX Trading ...

Forex News Trading - Colleyville Courier

Forex scalping is basically where you target lots of small price moves over the course of a particular trading day. It is quite a popular way of trading currencies but the drawback is that you will face a number of potential problems. The first ...

Forex Scalping - Some Potential Problems You May Face - Best Syndication

Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Neither ...