Latest Articles

A Review of Automated Forex Brokers
"Several companies offer automated forex broker services. In the following articles, you'll find brief reviews of each. What forex brokers offer automated services? GFT Forex is an automated forex broker, whose DealBook FX 2 software...

My succesful steps ( or forex trading course for newbie trader)
Hello newbie traders! I am also a young forex trader but have my own forex strategy. It is not strategy of a forex professional, but the strategy that I use to get money from FX every month. Each of us wants know the best way to be a successful...

The Basics of Forex
Foreign exchange market is also known as Forex or FX market. To date, it is the world’s biggest “economic bazaar”. FX produces an average of over $1 trillion daily earnings. That is 30 times more than combining all the volumes of America’s equity...

5 Reasons to Trade Forex Instead of Stocks

While Forex trading is becoming more popular in the United States, the vast majority of investors still do not understand the massive advantages offered in the foreign currency market when compared to equities or fixed income trading. When you fully grasp the following concepts, you'll understand why you might want to reconsider your current investment strategies.

1. Currency prices are not heavily influenced by institutional investors. In stock trading, there is a limited amount of volume on a daily basis. Each stock has a specific number of shares on the open market and trade prices are governed by the number of people attempting to buy or sell shares at a specific point in time. This makes the market vulnerable to price swings when a large investor is attempting to buy up or unload large amounts of shares. For example, if some pension fund owns 10% of a company and suddenly decides to liquidate their position, the market is now flooded with sell orders. Since the amount of shares attempting to be sold will outnumber the amount of buy orders, the price of the stock will start to drop as the number of buyers days up. This creates losses for the remaining shareholders. On the other hand, the forex market is so massive and has so many investors that no single investor can possibly have a major impact on pricing. There are too many units of Euros, Dollars, Yen, etc for any single institution to hold even close to a controlling interest in any currency.

2. Margin requirements are significantly lower in forex trading than equity trading. While the exact amount of margin allowed is determined by each broker, the restrictions are usually much less stringent when trading forex. Margin allows the investor to "play with house money." In essence, you're borrowing money from the broker to invest in your own account. While this can be risky, it can also be insanely profitable. For example, let's say you have $10,000 of your own money to invest. If you open up a margin account at an equity broker, you can usually margin up to 50% of the value of stock. So if you buy $10,000 in Microsoft stock, you can borrow another $5,000 to own a total of $15,000 in value. With your forex account, the margin requirement is often as low as 1%. Which means that if you buy $10,000 in Euros, you can use your broker's money to buy another $1,000,000. So you now own over $1 million in Euros. Now lets say that the value of each investment increases 10%. Your $15,000 in Microsoft stock is now worth $16,500. You sell it, pay back the $5,000 you borrowed, and you pocket $1,500 in profit (minus any fees or interest). Your return on investment is 15%. If your Euros went up 10%, your $1 million is now worth $1.1 million. After selling and repaying your broker, you profit $100,000 before any

interest. That's a return on investment of over 1,000%. Of course, you need to be extra careful when trading on margin. Imagine if the transaction went the other way. You'd be in a much bigger hole in the forex scenario. But the potential for enormous gain is there and is one of the major reasons why forex trading is so attractive to serious investors.

3. Forex trading is open 24 hours a day. Unlike the U.S. stock markets, you can trade forex any time of day from Monday through Friday. If a major news story breaks when you're holding stock, and it's after hours, you're stuck holding onto your position until the market opens the next day. By the time this happens, everyone else knows the news and there's thousands of buy/sell orders waiting when the opening bell rings. This will dramatically influence your trade price and negate any advantage you might have had by being one of the first to react. Keep in mind that many corporations withhold major news such as earnings reports and personnel moves until after the market closes. They do this to minimize emotional trading, which is smart for them to do but also hurts savvy investors. Since Forex trading is open 24 hours, you can place your trade order whenever major events occur.

4. The foreign exchange market is more liquid than the equity market. Forex is the largest market in the world. Every day, an average of $1.4 trillion dollars is traded, and the amount of securities (foreign currencies) is minuscule when compared to the number of companies traded in the equities market. This means that there are always buyers to be matched with sellers, which means that you'll have a much better chance to get a fair and accurate price on your trade than if you were trading a low volume stock where the bid and ask spreads can be very large.

5. Forex trading offers the advantage of limited risk. This is one of the large advantages over the futures market. When you buy a futures contract, you are obligated to buy or sell a specific amount of a specific commodity at a specific time for a specific price. Which means that if disaster hits, you're out of luck. For example, lets say you buy a futures contract to sell corn. If news breaks that reports an outbreak of deaths caused by a pesticide used in corn crops, the price on your contracts will drop through the floor, limits will drop, and you could be stuck in your position and end up taking massive losses. This would not happen in the forex market since you can leave your position at any time.

About the author:

This article is just a small piece of the free Forex Trading Course at forexgameplan.com. Go learn about this incredible market and sign up today while the 30 day course is still free.
Written By: Francis Gillen




Investment Markets

FOREX-Dollar, yen gain as economy worries grow
Reuters - 7 hours ago
By Steven C. Johnson NEW YORK, Nov 20 (Reuters) - The dollar and yen rose against the euro and other currencies from countries with high interest rates as ...
Forex Markets: A Look Into The Dollar Part I istockAnalyst.com (press release)
Australia Intervenes in Forex Market, Spends Record 3 Billion to ... Daily FX
Dukascopy Daily Forex Overview Forex Hound
International Business Times - Bloomberg
all 276 news articles

FOREX-US dollar sinks vs yen, rises vs euro as stocks swoon
Reuters - 2 hours ago
By Gertrude Chavez-Dreyfuss NEW YORK, Nov 20 (Reuters) - The US dollar slumped versus the yen on Thursday, squeezed by Wall Street's plunge as fears of a ...

FOREX-Yen advances vs dollar, euro, stocks eyed for direction
Reuters - Nov 19, 2008
By Steven C. Johnson NEW YORK, Nov 19 (Reuters) - The dollar fell against the euro and sterling on Wednesday as US stocks stabilized and big buy orders for ...
FOREX-Dollar briefly pares losses vs yen after data Reuters
all 13 news articles

StarPhoenix

FOREX-Recession fear sweeps yen up; high-yielders fall
Reuters - 12 hours ago
The dollar was down half a percent at 95.45 yen , while the higher-yielding Australian dollar tumbled roughly 2 percent to 59.76 yen . ...
HK shares steady but telco services firms outperform Forbes
FOREX-Auto-driven economic, stock worries lift yen, dlr Reuters
all 2,562 news articles

Euro Forecast to Decline Further Against US Dollar on Forex ...
Daily FX, NY - 6 hours ago
EURUSD – Currency trading crowds have recently bought the Euro against the US Dollar, and we forecast that the sudden shift in sentiment may bring Euro ...

Forex Interplay: Dancing Around the Dollar
Seeking Alpha, NY - 2 hours ago
By this author: The euro moved higher vis-à-vis the US dollar today (Thursday) as the single currency tested offers around the US$ 1.2585 level and was ...

FOREX-Dollar rises vs yen, US stocks dictate direction
Reuters - Nov 18, 2008
By Gertrude Chavez-Dreyfuss NEW YORK, Nov 18 (Reuters) - The dollar climbed versus the yen on Tuesday, boosted by a steady performance in the US stock ...
FOREX-Rebounding US stocks lift dollar vs yen Reuters
all 18 news articles

FOREX-US dollar slips against yen, up versus euro
Reuters UK, UK - Nov 19, 2008
By Gertrude Chavez-Dreyfuss NEW YORK, Nov 19 (Reuters) - The US dollar slipped versus the yen on Wednesday, as worries grew about the ailing US auto ...

International Business Times

Forex - Dollar keeps rising on global economy worries
Forex Hound, NY - Nov 19, 2008
As forex specialist, ACM provides only currency and precious metals trading via highly professional forex trading software. All customers are aware that ...
Dollar keeps rising on global economy worries International Business Times
all 4 news articles

FOREX-Yen broadly supported by economic fears
Reuters - Nov 19, 2008
By Naomi Tajitsu LONDON, Nov 19 (Reuters) - The yen strengthened broadly while the dollar steadied on Wednesday as deepening unease about the world economy ...

Google
Sign up for PayPal and start accepting credit card payments instantly.