If you are interested in trading currencies
online, you will find the Forex market offers several
advantages over equities trading.
24-Hour Trading
FOREX is
a true 24-hour market, which offers a major advantage
over equities trading. Whether it's 6 p.m.
or 6 a.m., somewhere in the world there are always
buyers and sellers actively trading foreign currencies.
Traders can always respond to breaking news immediately,
and P&L is not affected by after-hours earning
reports or analyst conference calls.
After-hours trading for U.S. equities brings with
it several limitations. ECN's (Electronic Communication
Networks), also called matching systems, exist to
bring together buyers and sellers - when possible.
However, there is no guarantee that every trade will
be executed, nor at a fair market price. Quite frequently,
traders must wait until the market opens the following
day in order to receive a tighter spread.
Superior Liquidity
With a daily trading volume that is upwards of 100x
larger than the New York Stock Exchange, there are
always broker/dealers willing to buy or sell currencies
in the FX markets. The liquidity of this market, especially
that of the major currencies, helps ensure price stability.
Traders can almost always open or close a position
at a fair market price.
Because of the lower trade volume, investors in the
stock market are more vulnerable to liquidity risk,
which results in a wider dealing spread or larger
price movements in response to any relatively large
transaction.
100:1 Leverage*
100:1 leverage is commonly available from online FX
dealers, which substantially exceeds the common 2:1
margin offered by equity brokers. At 100:1, traders
post a $1,000 margin for a $100,000 position, or 1
percent.
While certainly not for everyone, the substantial
leverage available from online currency trading firms
is a powerful, moneymaking tool. Rather than merely
loading up on risk as many people incorrectly assume,
leverage is essential in the Forex market. This is
because the average daily percentage move of a major
currency is less than 1 percent, whereas a stock can
easily have a 10 percent price move on any given day.
The most effective way to manage the risk associated
with margined trading is to diligently follow a disciplined
trading style that consistently utilizes stop and
limit orders. Devise and adhere to a system where
your controls kick in when emotion might otherwise
take over.
Trading Potential in both Rising and Falling Markets
In every open FX position, an investor is long in
one currency and short the other. A short position
is one in which the trader sells a currency in anticipation
that it will depreciate. This means that potential
exists in a rising as well as a falling market.
The ability to sell currencies without any limitations
is another distinct advantage over equity trading.
In the US equity markets, it is much more difficult
to establish a short position due to the Zero Up tick
rule, which prevents investors from shorting a stock
unless the immediately preceding trade was equal to
or lower than the price of the short sale.
Past performance is not necessarily indicative of
future results and individual returns may vary amongst
participants. Investment return and principal value
will fluctuate so that an investor’s shares,
when redeemed, may be worth more or less than their
original cost. All performance figures assume the
reinvestment of realized gains and capital gains.
There is considerable exposure to risk in any foreign
exchange transaction, including, but not limited to,
the potential for changing political and/or economic
conditions that may substantially affect the price
or liquidity of a currency. This is not a solicitation
to invest. Please consult your investment advisor
and read all risk warnings before committing funds.
*Leverage Disclosure:
Without proper risk management, a high degree of leverage can lead to large losses as well as gains.
Premierefx™ is a trademark
of Premierefx™, LLC and any related products, are
analytical tools only and are not intended to replace
individual research or licensed investment advice. Unique
experiences and past performances do not guarantee future
results! Testimonials are non-representative of all clients;
certain accounts may have worse performance than that
indicated. Trading stocks, options and spot currencies
involves substantial risk and there is always the potential
for loss. Your trading results may vary. No representation
is being made that any software or training will guarantee
profits or not result in losses from trading. Neither
the software programs, any explanation or demonstration
of their operation, nor any training held in conjunction
therewith, including, without limitation, through online
chat, radio programs, during in-person seminars or otherwise,
should be construed as providing a trade recommendation
or the giving of investment advice. All purchasers of
software or other products owned by Premierefx™,
LLC are encouraged to consult with a licensed representative
of their choice regarding any particular investment or
investment strategy. Prices and offers are subject to
change without notice. All shipping & handling charges
are non-refundable.
Trading foreign exchange on margin
carries a high level of risk, and may not be suitable for
all investors. Before deciding to trade foreign exchange
you should carefully consider your investment objectives,
level of experience, and risk appetite. The possibility
exists that you could sustain a loss of some or all of
your investment and therefore you should not invest money
that you cannot afford to lose. You should be aware of
all the risks associated with foreign exchange trading,
and seek advice from an independent financial advisor if
you have any doubts.
