Why forex?

As mentioned before, forex market has been available to individuals only for the last ten years or so. It is a good alternative to stocks, commodities, futures and bonds markets, for the following reasons

1. Liquidity

Forex market is the largest and most liquid one in the world. This means you can capture small market movements and profit. Also you will never get stuck in a trade as you can sell your position any time you want in the liquid market.

2. Continuous operation

Trading operates 24 hrs a day except weekend. You have the flexibility and freedom to decide when to trade.

3. Cost

Transaction cost is lower and commission is zero. Brokers make money by selling at a higher price than buying. The difference is normally less than 0.1% at retail level.

4. Leverage

You can leverage on margin account. This way you can make handsome return on investment for small market movements. But be aware of potential loss magnified by leverage.

5. Flexibility

You can profit in both rising and falling markets. For example, if you think the Japanese economy will be stronger than the US and USD will weaken against JPY, you could execute SELL (or short) USD/JPY order. By doing so you have bought Yen in the expectation that it will appreciate against US dollar. On the other hand, if you feel the Japanese economy will be weaker, you could execute BUY (or long) USD/JPY order. This way you have bought US dollar and hope it will appreciate against Yen.

6. Free practice

Most online brokers offer free demo or practice account for newbie’s, along with free news, analysis and charts. This is a great way to hone your skills before you start trading with real money.

7. Low entry barrier

You can start trading from as low as $50 capital. This opens forex trading even to students who have little extra money.

8. Too large for manipulation

You dont have to worry about a single person or institution swaying the market. Problems such as "insider trading" do not arise.

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