Have you been frightened by my last statement in my previous post that 80-90% of traders lose money? Don't worry, this refers to all traders and not only to Forex, meaning it applies equally to those trading stocks, options, futures, etc. so if you intend to trade in the financial market, you'll face similar kind of odds everywhere. But there are many advantages of trading Forex as oppose to trading stocks (or options). What are they? I've mentioned a few in my last post but I think I'll list all the major advantages here for easy reference.
Top 10 advantages for trading Forex (not in any particular order)
1. Very low start-up capital. You can open a micro-account for USD100.
2. No commissions, no transaction fees, no brokerage, etc.
3. No fixed lot size, you can trade anything from 0.01 lot upwards, depending on your fund and margin availability.
4. High leverage, 200:1 is typical. This increases the potential for higher profits. (In the same time, it also increases the potential for higher losses, you don't get something for nothing!)
5. Very high liquidity so you get instant execution. With an average volume of over USD3 trillion per day, Forex is the most liquid market in the world. (Because of this liquidity, the market moves very rapidly during period of high activity, too fast even for the order processing and you may experience re-quotes at times. But there are ways to overcome this.)
6. A 24-hour market. You don't have to change your lifestyle in order to trade and can choose the hours most suitable for you. (Of course, the trading opportunity differs at different time of the day but you decide when you want to trade. There are also rest days, i.e. Saturdays and Sundays and thank goodness for that or some traders will become zombies without this break.)
7. No single body or institution can control the market. Governments may try to influence the market, but the market decides how it wants to react.
8. No insider trading. Because of the sheer size and non-regulated nature of the market, fraud is next to impossible.
9. It is easier to pick what to trade as there are only a handful of major Forex currency pairs while there are thousands of stocks available.
10. No slippage, minimal or no gaps during weekdays (gaps do appear over the weekend) and stop loss is guaranteed.
You can trade Forex in the comfort of your own home with just an Internet connection and a laptop (you can also trade in your office but don't let you boss know!) but since you can do the same for stocks, options, etc, this is not listed as an advantage. One professional Forex trader does all his trading in Starbucks.
Convinced? In my next post, I'll talk about the local market (the Forex seminar market, not the Forex market) so you can see if there's one coming near you. I always wonder why people are still considering trading options, judging from the availability of such seminars. I hope those well versed with options trading can give their comments so that we are not missing out on something.
Ronald Kwok
http://cbpirate.com/s/cbp/ronaldkwok
Risk Warning
Forex Trading on margin carries a high level of risk, and may not be suitable for all traders. The high degree of leverage can work against you as well as for you. Before deciding to trade forex you should carefully consider your trading objectives, level of experience, and risk appetite. It is possible that you could lose some or all of your initial capital and therefore you should not trade money that you cannot afford to lose. You should be aware of all the risks associated with forex trading, and seek advice from an independent financial advisor if you have any doubts. Having said that, anyone with a sound mind can trade Forex but he must be aware of the risks involved as highlighted above.
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