Forex Trading Guide - Forex Research Section

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 Research News

forex research

NEW YORK (Reuters) - Investors dumped shares of Fannie Mae (FNM.N: Quote , Profile , Research , Stock Buzz ) and Freddie Mac (FRE.N: Quote , Profile , Research , Stock Buzz ) on Monday after a newspaper report said government officials may have no ...

Bailout concerns slam Freddie, Fannie shares - Reuters

NEW YORK, (Reuters) - The U.S. dollar rose Wednesday, snapping a two-day losing streak, supported by perceptions that slowing global economic growth would prompt a wave of interest rate cuts outside the United States. The greenback clung to gains in ...

FOREX-Dollar rises, snaps two-day decline - Forbes

ADA, Michigan , August 18 /PRNewswire/ -- GFT, worldwide leaders in online trading, announced the addition of Kathy Lien and Boris Schlossberg to its currency research division. As two of the forex market's most respected analysts, they will serve as ...

GFT Hires Currency Strategists Kathy Lien and Boris Schlossberg - MSN MoneyCentral

NEW YORK (Reuters) - The U.S. dollar rose on Wednesday, snapping a two-day losing streak, supported by perceptions that slowing global economic growth would prompt a wave of interest rate cuts outside the United States. The greenback clung to gains ...

Dollar rises, snaps two-day decline - Reuters

The U.S. dollar rose on Wednesday, snapping a two-day losing streak, supported by perceptions that slowing global economic growth would prompt a wave of interest rate cuts outside the United States. The greenback clung to gains in quiet trade despite ...

Dollar Rises in Thin Trading, Snaps Two-Day Decline - CNBC

Free $100,000 Practice Account With Real-Time Charts, News & Research. Live and real time forex signal. Try it for yourself and see what forex traders in 45 Countries are talking about. Our system will help you make money in a very short time in CDh ...

Search Leading Offers For Everything Forex news - Colleyville Courier

NEW YORK (Reuters) - The U.S. dollar rebounded Wednesday, still bolstered by a growing view that the United States could skirt a possible recession even as other major countries grappled with their own decelerating economies. The dollar indexfirmed ...

FOREX-US dollar rallies in thin trading; uptrend intact - Forbes

NEW YORK, Aug 19 (Reuters) - The U.S. dollar weakened across the board on Tuesday, declining for a second straight session, as investors took advantage of weakness in U.S. stocks to further take profits on the greenback's recent steep gains. The euro ...

FOREX-US dollar falls for 2nd straight day as stocks weigh - Reuters

Home :: Technical :: Forex Strategy :: Daily Forex Strategy Briefing Send Print Add To Rss Daily Forex Strategy Briefing Dollar Edges Higher Wed, Aug 20 2008, 22:44 GMT

Dollar Edges Higher - FXStreet.com

SOCHI, Russia, Aug 20 (Reuters) - President Dmitry Medvedev said on Wednesday it would meet Russia's top business lobby in September, while a top businessman said the meeting would discuss potential changes to the country's tax system. Medvedev met a ...