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The LIQUIDITY:
FOREX investors never have to worry about being
"stuck" in a position due to a lack of market
interest. In this US$1.5 trillion dollar per day
market, major international banks are always
willing to provide both a bid (buying) and ask
(selling) price. Liquidity is a powerful
attraction to any investor as it suggests the
freedom to open or close a position at will.
Because the market is highly liquid, most trades
can be executed at a single market price. This
avoids the problem of slippage found in futures
and other exchange-traded instruments where only
limited quantities can be traded at one time at
a given price. The six major currencies (JPY,
EUR, CHF, GBP, CAD & AUD) are generally
considered to be the most liquid.
LEVERAGE:
FOREX investors are permitted to trade foreign
currencies on a highly leveraged basis - up to
100 times their investment with some brokers. An
investment of US $10,000 would permit one to
trade up to US $1,000,000 worth of any
particular currency.
HOURS: A
substantial attraction for participants in the
FOREX market is that it is open 24 hours per
day. An individual can react to news when it
breaks, rather than waiting for the opening bell
when everyone else has the same information, as
is the case in many markets. This may enable
market participants to take positions before an
important piece of information is fully factored
into the exchange rate. High liquidity and 24
hour trading allow market participants to exit
or open a new position regardless of the hour.
SIZE FLEXIBILITY:
FOREX investors have greater flexibility with
respect to their desired trade quantity. With
most FOREX Brokers you can trade ANY DESIRED
AMOUNT over $25,000 USD, specifically tailored
to your needs or risk tolerance. Size or
quantity flexibility can be especially useful to
corporate treasurers who need to hedge a future
cash flow or portfolio managers who need to
hedge foreign equity exposure.
SETTLEMENT FLEXIBILITY:
This concept, a corollary to point # 4, allows
you to trade for various settlement dates or
'maturities' out to 1 year further allowing you
to tailor your trades or hedges to your specific
needs. This feature of trading FOREX differs
from futures where settle dates are relegated to
4 'expirations' per year, and can also be quite
useful to corporate treasurers and portfolio
managers.
NEVER A 'BEAR' MARKET:
Another advantage of the FOREX market is that
there is no 'bear' market, per se. Currencies
are traded in pairs, for example US dollar vs.
yen or US dollar vs. Swiss franc. Every position
involves the selling of one currency and the
buying of another. If one believes the Swiss
franc will appreciate against the dollar, one
can sell dollars and buy Swiss francs. Or if one
holds the opposite belief, one can buy dollars
for Swiss francs. The potential for profit
exists as long as there is movement in the
exchange rate or price. One side of the pair is
always gaining, and provided the investor picks
the right side, a potential for profit ALWAYS
exists.
FREE AND FAIR FLOW OF
INFORMATION: Ever notice in the stock
market that a certain stock is suddenly down 5%
or more but you have absolutely no idea what
caused such a quick spike? Usually, it's not
until the next morning when you read it in the
newspaper that you find out that earnings
forecasts have been revised downward; or that an
insider at a particular company has resigned; or
that some other influential piece of information
was released that you were not privy to. Imagine
how much money you could have saved had you
known this vital information at the same time as
all other market 'insiders.' - Or how much you
could even have earned in profit by acting in a
timely manner… Imagine a market where there is
little or no 'inside information' and all
pertinent, market-moving news is released
publicly to everybody in the world at the same
time… Welcome to the foreign exchange market. |
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