Why To Trade Currencies? (and How…)

Posted on June 19, 2008
Filed Under Trading Education |

There are many advantages to trading Forex. Here are just a few reasons why, so many investors are choosing this market:

No Fees. No clearing fees, no exchange fees, no government fees, no brokerage fees, no redemption fees. Forex brokers are reimbursed for their services through something called the bid-ask spread, essentially a commission. This commission is several times less than stock exchange market fees and commissions (read below)!

No middle man. Spot currency trading eliminates the middlemen, and allows you to deal directly with the market makers responsible for the pricing on a given currency .

No fixed lot size. In the futures markets, for instance the contracts are set by the exchanges. A standard-size contract for silver futures is 5000 ounces. In spot Forex, you determine your own lot size.

This allows investors to participate with accounts as small as $250.

Low transaction costs. The retail transaction sacrifice (the bid/ask spread) is typically less than 0.1% in normal market conditions. At superior dealers, the spread could be as low as .07% (percent). This depends on your account settings and all will be explained later.

A 24-hour market. There is no waiting for the starting bell - from Sunday nightfall to Friday daylight EST, the Forex market never sleeps. This is awesome for those who want to trade on a part-time basis, because you can choose when you want to trade–morning, noon or night.

No insider trading. It is impossible to corner the market. The global foreign exchange market (Forex) is so vast and has so many participants that no specific entity (not even the Federal Reserve) can command the market charge for a significant period of time.

Leverage. In Forex trading, a small margin account can command a much bigger interbank position. Leverage gives the seller the ability to make those high profits, and at the same time keep exposed wealth to the minimum. For example, Forex brokers recommend 200 to 1 weight, which means that a $50 cash margin deposit would allow a trader to buy or sell a $10,000 contract. Similarly, with $500 dollars, one could trade with $100,000 dollars and so on. However, margin is a double-edged sword. Without proper risk management, this high gradation of leverage can lead not only to large gains but to large losses as well.

High Liquidity. Because the Forex Market is so vast, it is also awfully liquid. This means that under regular market conditions, with a click of a mouse you can immediately buy and sell at will. You are never left in a situation when you are unable to close a position.

Free Demo Accounts. Most online Forex brokers pffer demo accounts for beginner traders to practice trading, along with streaming Forex news and charting and trading software. All free! These are very valuable resources for SMART traders who would like to polish their trading skills with ‘play’ funds before opening a live trading account and risking actual money.

Free Trading Software. As mentioned earlier all brokers provide you with trading and charting software, usually free of charge. The software allows you to open and close trades in real time, with a click of a mouse! You can even configure your online trading platform automatically to close your position at your prefered Take Profit level and/or close your position if it is going against you (a stop loss order).

Mini and Micro Accounts. You would think that starting out as a currency trader would require a lot of investment. The reality is, compared to trading stocks, options or futures, it does not. Online Forex offer “mini” and “micro” trading accounts, some with a minimum account deposit of $300 or less. This is not to say that you should open an account with the bare minimum but it does make Forex much more affordable to the average individual who does not have a lot of initial investment.

Despite all these advantages trading the Forex is not an easy undertaking and shold never be taken light-mindedly especially by novice forex traders. The promise of great returns can quickly turn into a reality of frustration and losses if you start trading unprepared.

What is the best way to prepare?

Invest in Forex education if you want to make this your full-time source of income. One excellent Forex education resource is Peter Bain’s “Forex Mentor” course. Peter, a long term professional Forex trader has compiled his course as a series of printed materials, exercises, videos and ongoing personal live video sessions where he explains the current market situation and advises participants what to do.

The next best thing, (for those who don’t want to go through weeks of training and want to get a taste of Forex trading right away) is to get the right automated tools for the job. A proven, no-guesswork system designed and tested by professional traders. Two of the industry leaders in Forex software tools for new traders are the Forex AutoPilot Software (FAPS) and the Forex Killer System.

The Forex Autopilot Software is a completely automated “set it and forget it” type of system. By dragging and dropping an icon onto your chart you are activating the trading robot which will then go on to monitor the market, open and close trades non-stop, 24/7!

The Forex-Killer on the other hand does not actually trade for you. Given the current market conditions, the Forex Killer coputes the next move of the market and gives you Buy, Sell or No Trade signals, with probabilities and projected entry and exit levels, effectively telling you how to setup your entry, stop-loss and take-profit orders.

With either system at your dosposal you can start trading with 1000 usd or even less. Just keep in mind that more capital will minimize the risk and give you greater profits.

Which system is best suited for you? Check out the web-sites, read the result reports on those pages, watch some of the recent testimonial videos and decide for yourself!

Tags: Trading Education

Why To Trade Currencies? (and How…)

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