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FOREX OR FUTURES - WHICH IS RIGHT FOR YOU, FOREX - THE ATM OF THE INVESTMENT WORLD
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FOREX OR FUTURES : WHICH IS RIGHT FOR YOU

The Foreign Exchange (FX) is one of the fastest-growing investment arenas today. Large institutional investors and hedge funds are big players in the forex market; and in the past three years, the Foreign Exchange market had an estimated 50 percent increase in volume. Some had credited this in crease to the large activity created by the online currency trading for the re tail investor. The forex market is an over-the-counter market, which means that there is no main exchange or clearinghouse. This is contrary to the fu tures markets which offer futures trading in “open outcry” and electronic access; which is transparent pricing through a trading platform. This enables one to see the bids/asks and size, otherwise known as the “depth of market” (dome).

In this book, we will be looking at the different aspects of trading the currency markets, including the advantages and disadvantages of trading the forex market. In addition, you will learn how to use other resources to make better decisions on when to enter or exit your forex positions. Trad ing the forex offers leverage, leverage that the individual controls. Through the use of margin, an individual investor has the choice to increase or de crease leverage through various means. Most currency firms offer 100 times leverage on a regular size account; compare this leverage to the leverage of fered to the average equity investor, and you can see why many traders are more attracted to trading the forex. As mentioned previously, leverage in the forex market can also be customized to the individual trader, which means that a trader can choose to lower or eliminate leverage while trading foreign currencies.

FOREX : THE ATM OF THE INVESTMENT WORLD

Foreign Exchange currency trading, otherwise known as the forex market, offers a completely different investment asset class that offers leverage and virtually unrestricted access 24 hours a day. Forex trades virtually around the clock from the Asian market open on Sunday night until the U.S. mar ket close on Friday afternoon. One of the attractions from an individual trader's perspective is that there is this constant access to make a trade. In other words, in every transaction, a trader is long one currency and short the other. A position is expressed in terms of the first currency in the pair. For this reason, currencies are always traded in pairs; for example, if you have purchased euro and sold U.S. dollars, it would be stated as a euro/dol lar pair. With a volume of over $1.5 trillion daily, the Foreign Exchange market is the largest and most liquid financial market in the world—more than three times the aggregate amount of the U.S. equity and Treasury markets combined. This means that a trader can enter or exit the market at will in almost any market condition with minimal execution risk. Due to the sheer size of liquidity, a continuous supply-and-demand driven product (we all use and need money), and the accessibility of trading make many professional traders consider the forex market like a bank's automatic teller machine (ATM).

The forex market is so vast and has so many participants that no single entity, not even a central bank, can control the market price for an ex tended period of time. Unlike other financial markets, the forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations, and individuals, trading one currency for another. The lack of a physical exchange enables the forex market to oper ate on a 24-hour basis, spanning from one zone to another across the major financial centers.

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