sábado, 3 de maio de 2008

Forex Markets - What Drives Traders to Try It Out

The foreign exchange market carries a high level of risk and can lead to significant losses if traders do not possess the ability needed to successfully make trades. Despite the potential of the forex, most beginners do not report profits until they are more experienced in the market. Knowing this, you may wonder what drives traders to try it out. The numerous benefits and unique attributes that the forex possesses may help explain its enormous popularity.

The first advantage of the foreign exchange market that catches many traders attention is that it never closes. Unlike other markets, the forex is open 24 hours a day in every country. This allows traders to take advantage of potentially profitable entry and exit strategies, without being restricted to the opening or closing of the market.

The forex market is also the most liquid in the world. This is advantageous because it allows traders to get in or out of the market whenever they choose. They are not bound by minimum trading limits or execution barriers.

The forex also boasts a high leverage ratio. This ratio is defined as the comparison of debt to equity. A leverage ratio of 400 would not be out of the ordinary in the foreign exchange market, compared to an average leverage ratio of two in the equity markets. Keep in mind that while this ratio indicates a higher potential profit, it can also make the potential loss more significant.

Another advantage that attracts traders to the forex market is its low transaction costs. The transaction cost, which is calculated by the difference between the bid and ask price, known as the spread, is much lower in the forex than in other markets. The average transaction costs are less that .1 percent under the normal market conditions.

Traders are often moved to give the forex a try because it is unregulated. Although the operations of many of its participants are regulated under banking laws, the actual daily operations of the foreign exchange market are unregulated. There are no rules or regulations that apply directly to the forex, and many brokers in the United States are not even required to report to the Internal Revenue Service.

Another benefit of the forex is that it is always a bull market. A bull market is any market in which prices are in an upward trend.Trading in the foreign exchange market requires buying one currency while selling another. This means that there is either a bull market for buying one currency or selling the other. Either way, there is a bull market opportunity for the trader.

Another reason that traders are diving into the forex is that that market cannot be cornered. This means that no individual investor, single company, or even bank can control the market for any significant length of time. Though some governments may try to manipulate the forex by buying in excess or dumping large amounts of a currency on the market, this strategy will not affect the market in the long term.

Many traders often feel that the fact that there is not a centralized location for operation is another benefit of the forex. The forex is made up of a global network of traders. Dealers and brokers communicate with their clients electronically, eliminating the need for face-to-face interaction. Since there is no centralized location to facilitate trade, most buying and selling of currency is done online, which makes it extremely convenient for almost any investor.

In conclusion, though the foreign exchange market is risky it numerous positive attributes explains why traders are flocking to it, making the forex the largest market in the world today.

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