Many traders are overwhelmed by the size and intricacy of the FOREX market, and yet a knowledgeable
trader has the potential to realize profits in this market that is unmatched by any other. There are
a number of aspects of the FOREX market that set it apart from any other market that give it this
potential.
First off, FOREX is a 24-hour market. You don`t need to wait for the opening bell here. Anytime a
trader wants to take advantage of positive market conditions, they can. This 24 hour timeline of
FOREX also means there is very little of the gaping that can occur in other exchanges. Trends, and
trading, progress more smoothly. The FOREX market is also the most liquid market in the world. That
means that a trader can enter or exit the market whenever they want, and there is little chance of
being caught in a position you can`t exit.
Another aspect of the FOREX market that creates a favourable trading environment is its high
leverage. Leverage ratios of up to 400 are normal in this market, compared to a leverage ratio of 2
(50% margin requirement) in the equity markets. Of course, this also increases the potential downside
of FOREX trading, something which should always been taken into account when considering a trade. To
offset this there is the FOREX`s low transaction cost. The retail transaction cost (the bid/ask
spread) is actually less than 0.1% (10 pips) under normal market conditions. At larger dealers, the
spread could even be less than 5 pips.
Also consider that at FOREX it`s always a bull market. A trade in the FOREX market means selling or
buying one currency against another. In essence, a bull market or a bear market for a currency is
defined in terms of its outlook for value against other currencies. If the outlook is positive, you
get a bull market for that currency, where a trader profits by buying the first currency against
other currency. However, if the outlook is negative, you have a bull market for other currencies and
the trader profits in the other direction. Whatever way you look at it, there is always a bull market
trading opportunity somewhere.
The FOREX market is so large and has so many participants that no single trader, even a central bank,
can control the market price for an extended period of time. Even when the central banks of large
countries try to intervene in the market, they find that their efforts have little effect on market
prices. What they do have is short-lived. FOREX is so large and liquid that no one can corner the
market.
Just as no one can corner the market, no one can regulate it either. The daily operations of retail
FOREX brokerages are not regulated under any laws or regulations specific to the FOREX market. In
fact, many of these types of establishments in the United States do not even report to the Internal
Revenue Service, though they are regulated under the banking laws of their respective countries.
However, the currency futures and options that are actually traded on exchanges like Chicago
Mercantile Exchange (CME) are under the regulation in the same manner that other exchange-traded
derivatives are regulated.
These characteristics combine to create a market environment that always has a good trading
opportunity somewhere, at any time of the day. It gives us a market that is remarkable liquid, with
high margins and low fees, and it is a market that has very little governmental intervention of any
kind. By this time, it should be clear to you that it is worth investing your time and energy to get
to know the FOREX, so that you can take advantage of this highly profitable market.
ForexGen serves both private and institutional clients. We have a strong commitment to maintain a
long term relationship with our clients.
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