As an individual trader, it can be difficult to decide what investments or markets to trade in. Occasionally, personal preference or education will play a role in what market you follow. As an investor it is important to narrow your focus on one, no more than two areas of the market, instead of trying to dabble in everything. Being a proficient trader in Forex, Equity, and Bond trading, requires a large amount of time and attention to or an expert.
There are many variables that affect each market differently. Forex being the largest and longest standing market globally, it tends to make this market ‘more fair’ then as the equity markets dominated by large hedge funds or companies. Today’s economy places the globe in a low interest rate environment, where central banks around the world are wrestling with low growth. Over the years loose monetary policy has been seen as a driving factor, however; influencers like interest rates, import/exports, tourism, and geopolitical risk will affect supply and demand for currencies.
Tensions continue to rise globally, from war in the Middle East, to the China and U.S trade war, each event will affect a country’s currency and its value. Additionally the Forex market is decentralized and runs electronically on a 24 hr. basis 5 days a week, with Forex representing a trading network of participants from around the world. More than $5 trillion are traded on average every day. By comparison, this volume exceeds global equities trading volumes by 25 times. The stock market is immensely popular, but it is exceeded in size by the Forex market.
Advantages to Forex Markets
The Forex market provides many opportunities and benefits that you will not find in the equity markets. Above we mentioned the size of the Forex market which drives liquidity and keeps a fair market price.
Additionally, it tends to be easier to trade Forex with a smaller amount of capital then if you were to trade in the equity markets, this is due to the leverage available to investors. Leverage is a dollar amount allowed to be borrow against your own current positions. The equity markets have stricter rules on leveraging your positions.
Another benefit from trading Forex is not having to pay a commission for your trades. The price difference between the bid/ask spread is what the dealer or broker charges for the transaction. On the contrary, the equity market forces most investors to pay a commission and are still subject to the bid/ask spread.
One key advantage the Forex market has over any other, is technical analysis and trading strategies. Some of the most widely known and used strategies, all started with the Forex Market. Strategies like ‘pivot points’ and ‘price action’ are widely used indicators that help traders gain an edge. With algorithm trading available for almost any investor, it is becoming increasingly easy to turn a profit regardless the size of trade.
Trading in general comes with many risks and can be quite complex depending on what strategies, securities, and markets you are focused on. This increases the importance of choosing the right broker and fully understanding the broker’s regulations and practices. Where the broker is registered, how they quote prices, and execute trades all plays a factor in choosing a quality broker. The team at NSBroker strive to provide complete transparency and make it easy to understand their practices. Some brokers will provide this type of information and others will not. There is plenty of training and study materials available for free, and anyone with interest in the Forex market or trading can get started. It is import though as an investor, to cover all your basis and know the risks associated before investing.
This article cannot be re-published without permission.