Lots of investors prefer different markets for lots of reasons. There’s not really a single answer for why any market is better than another, but today I thought I’d share three advantages of the Forex market:
The volatility of the Forex market is sometimes cited as its biggest risk–and I won’t try to tell you that’s not true. Volatility comes with inherent risk. But just like any other investments, securities with the highest risk also come with the highest yield. At the Apiary Fund, we know that a fear of risk in the Forex markets is overcome by a knowledge, and application, of risk management
I remember my early days of trading when I’d place an order and go to sleep, only to wake in the morning and find that my hopes and dreams had been crushed overnight. Naturally, I blamed the market when I should have blamed myself. I now know that with proper risk management, as taught in Apiary’s curriculum, you can make the market volatility work in your favor!
So how does the increased volume of the Forex market afford you an advantage? If you’ve had any experience trading other securities, you no doubt are familiar with placing an order and waiting hours, or even days, for that order to be filled. With fewer buyers and sellers in a certain market, you might not always have someone looking to fill an order–so you wait.
The Forex market is by far the largest market, so volume isn’t an issue. With so many buyers and sellers out there actively trading, you’ll find that you experience quicker fills on your orders.
I’ve written a bit on leverage before, but if you haven’t heard of it before, here’s a simple explanation: Think of leverage as money a broker lends to a trader to increase the trader’s buying power. In the United States, brokers can give traders fifty-to-one leverage. This means that for every dollar a trader puts into an investment, a broker will match it with forty-nine.
Obviously, there are a lot of different reasons trading Forex is advantageous for different traders. Your lifestyle and personality are also deciding factors in whether trading Forex is right for you. Besides the benefits of volatility, volume and leverage; Forex markets are world-wide, which means there isn't a certain time of day you can or can't trade, and they offer the opportunity to develop key money management skills.