The forex market, once only accessible to large financial institutions, offers a wide range of great trading opportunities for individual traders.
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In the past the currency market was only available to multinational corporations, large banks and other financial institutions. However, that fact has changed dramatically because trading is now available online. This means that individual investors can finally take advantage of the trading opportunities available. One estimate says that in 2000 there were over 6 million open online trading accounts compared to 1.5 million in 1997. Because of the surge in online trading, many firms now compete with large financial institutions for the opportunity to serve investors. This new development means one thing – the individual trader comes out the winner. The competition between land-based institutions and online companies lowers trading costs significantly. In addition, it also allows investors to control their own investments in the forex market.
Background of the Currency Market
Currency trading is known as direct access trading of currencies. Currency trading was limited to large institutional traders and banks but online trading technology now allows small investors to enjoy the wide range of trading opportunities available in this market. Currency trading takes place 24 hours a day, 5 days a week. The currency market is the world’s largest financial market and trillions of units of currency are exchanged every day. When you trade in this market you are exchanging one currency for another currency and currencies are always traded in pairs like USD/JPY, EUR/USD or GBP/USD.
A New Era of Currency Trading
In recent years, currency trading has been dominated by individual investors rather than large financial institutions. There are a variety of benefits to individual traders in this market particularly when compared to the futures, stock and other financial markets. First, the currency market is less complicated than most other financial markets. For instance, the stock market has over 5,000 instruments to choose from. With the currency market, there are only a handful of major currencies which makes it easier for individuals to determine what and how to trade.
When you invest in the currency market you can spend most of your time away from the computer – it is the most hassle-free way to participate in the financial markets. In addition, currency trading is much more cost effective in terms of transaction fees and commission fees. With currency trading you do not have to pay a commission fee and the only cost is the difference between the bid and the ask price. If you use an online stock broker, at the very most you will pay between $7 and $30 per trade. If you use a traditional broker you could spend as much as $100 on every trade you place.
Finding Opportunities in the Forex Market
It is essential to learn how to trade binary options and forex to find opportunities in the currency market. In addition, you need to learn how to plan those trades in order to make a profit. Every time you place a currency trade, you should follow these tips:
- Be a disciplined trader by creating a working trading strategy. With this strategy you must determine the position size, exit and entry points before the trade is opened.
- You should always use a stop-loss order when you trade. You need to determine your stop loss before you open a trade. You should never change your stop loss unless you are attempting to protect your profits.
- Understand the factors that drive the price of currencies
- Use an effective financial risk management plan
- Remain calm and patient – currency prices are volatile and frequently change. You should wait for the correct moment to enter a trade.
- Always manage your trade when it is open. You need to stay alert and be flexible in order to adjust to the market.
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The review "The Forex Market: Endless Trading Opportunities" was last updated on 17/04/2015.