The Forex

The largest, most diversified financial market in the world

Foreign Exchange (Forex or FX) is the simultaneous selling of a particular currency and the buying of another currency. The Foreign Exchange market is used by international travelers, individual investors, corporations, hedge fund managers, investment and commercial banks, and by national central banks (e.g. the Bank of Canada). With so many participants worldwide, the Forex market is truly the world’s most diversified financial market. With a turnover of almost US $3 trillion every day, the Forex is also the largest, most liquid market on earth, far bigger than all the equities markets in the world combined.

Clarity and Fair Market

Due to the diversified number of participants and the immense size of the Forex market, no single entity can completely control the direction of the market. Unlike the stock markets which may experience a sudden downturn and negatively affect the value of your portfolio, the Forex market is exciting and offers opportunities regardless of whether the market goes up or down. We believe that the Forex market is one of the fairest markets in the world.

Trading Opportunities

The sheer size, diversity and liquidity of the Forex market make it a powerful attraction to any investor. When coupled with other advantages such as stability, 24-hour trading, transparency, high-leverage* and low transaction costs, it’s easy to see why millions of average everyday people from every walk of life have begun to trade the Forex market every day. They include housewives, office workers, teachers, students, taxi drivers, insurance agents, realtors, engineers, businessmen, retired couples, and entrepreneurs, who now trade the currency markets.

Whatever you do for a living, you too can be part of one of the most dynamic and most liquid financial markets in the world. You can trade with the goal of making a living, or supplementing your income. A passion for knowledge is essential in this volatile market.

An Electronic Market

Unlike other financial markets, the Forex market is an electronic market, with no central exchange. Instead, transactions are executed via a global network of banks. This allows the Forex to be open 24 hours a day, 6 days a week.

A 24-hour Market

The Forex is a true 24-hour market, open round the clock, six days a week. The market follows the sun around the globe beginning every day in Sydney, then moving to Tokyo, followed by London and then on to New York. The market only closes over the weekend i.e. Friday at 1600 hrs ET and opens again on Sunday at 1700 hrs ET. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.

Liquidity

With a daily trading volume that is 50 times larger than the New York Stock Exchange, there are always brokers/dealers willing to buy or sell currencies in the Forex market. Depending on market conditions the forex market offers unparalleled liquidity. Traders can open or close a position at a fair market price, regardless of transaction size.

100:1 Leverage

100:1 leverage* (in some cases, 200:1) is commonly available from most online FX dealers. While certainly not for everyone, the substantial leverage allows traders to trade based on their risk tolerance. Rather than merely loading up on risk, as many people incorrectly assume, leverage is essential in the FX market. This is because the average daily percentage move of a major currency is less than 1%, whereas a stock can easily have a 10% price move on any given day.

*Without proper risk management, a high degree of leverage can lead to large losses as well as gains.

Lower Transaction Costs

It is much more cost-efficient to trade Forex in terms of both commissions and transaction fees. On the Forex the spread is the only transaction cost incurred. This fee is charged only on entry not on exit, again, unlike the equity market where the spread is faced both on entry and on exit in addition to the commissions.

Risk Management

Everyone knows that when trading futures, the risk can be unlimited. There are times when you cannot exit your position and this could wipe out the entire equity in your account. What’s more, if the price continues to move against you, you must find even more money to make up the deficit in the account.

In the Forex market, the most you could likely lose on a trade is the amount determined by where you set your “stop loss”. Worst case, if everything went against you, the maximum you would stand to lose is the equity in your account. However, most trading systems employed by online Forex brokerage companies have automated systems; your positions are thus closed when the equity shrinks below a pre-determined level.

Trading Opportunities in Both Rising and Falling Markets

In every open FX position, an investor is ‘long’ in one currency and shorts 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. In other words, trading opportunities exist from either ‘buying' when the market is going up, or selling when the market is going down. The ability to sell currencies without limitations is another distinct advantage over equity trading.