Good or Bad Forex Markets is a question which requires good information to reach a good conclusion:
Currency trading is increasingly popular among investors, several of them are even abandoning the stock market to start with the currency market. For many of those who do not know the currency market, this may seem somewhat surprising. But for experts, it’s no of wonder at all. Forex has a number of unique advantages that make it very attractive.
Good, Market Open all day
Unlike stock markets, which open each day for a limited time, the foreign exchange markets is open 24 hours a day on working days. The markets starts on Monday morning in New Zealand and then develop to the rhythm of the solar cycle until the closing of the markets in North America, which happen on Friday afternoon. This means that you can trade a currency pair such as the EUR/USD anytime, not only during your working hours.
Size of the markets
The currency markets is the largest financial markets in the world. Every day it trades with over $5000 billion, creating enormous liquidity. This means that it doesn’t matter if you have a few thousand dollars or billions of dollars, there are always buyers and sellers willing to negotiate with you. This markets is very difficult to manipulate because of its size, so all investors have relatively equitable trade conditions.
Low trading costs
Every time you trade in the Forex markets, you need to take into account what each position costs. Fees, commissions and taxes always cut benefits, so it is essential to find markets with low negotiating costs. From this perspective, Forex is probably the most economical financial markets and actually trading with it is very cheap. This is due in large part to the intense competition that exists among its brokers, some of which even offer bonuses to open an account.
A high leverage
In a matter of currencies, you can go very far with a relatively modest amount of capital. Forex brokers offer a big margin compared to the margin that is given in the stocks, instead of getting a margin of 2:1, in U.S. you can get a margin of 50:1, 100:1, 500:1 which can be even higher depending on the countries where it is traded. This means that if you have $1,000 in your account, you can open a position with a value of up to $50,000. This magnifies the effect of currency movements, which creates much greater benefit opportunities although it is essential to manage risk at these levels.
One of the best ways to make a profit in any financial markets is to detect a trend and follow it. Generally, in Forex are very well defined tendencies that can be extended over long periods of time. This makes it easier to follow the trend and get solid benefits. The reason for this is that the performance of currencies is linked to the economic performance of a country in the long term, which tends to follow a relatively slow cycle. However, it is important to watch out for unexpected events for example, the recent decision by the Swiss National Bank to free the Swiss franc’s minimum price against the Euro, which caught by surprise to many currency traders, which generated significant losses in more than one case.
Free Web Resources
A search on the Internet brings page after page of resources for Forex trader, including brokers, educational materials, calculators, software and handbook of strategies, etc. Some of these are pretty good and can help the new trader to know these markets, unfortunately others are scams or parcels sales. Buy carefully!
The dark side of leverage
The dark side of leverage is the high risk. Surely a trader can realize huge victories with margin of 50:1, but what happens when the first loss arrives?
The trader will be probably force an exit of the trade and the account is to be eliminated.
The fact that brokers are offering crazy margin levels does not mean that it should be used. The key to surviving and thriving in Forex markets is to be able to survive a series of business with Lost.
The prudent trader will therefore limit the amount of its commercial capital, which runs the risk of each trade.
Our recommendation is the risk of not more than 2% of the equity in any single trade. Limiting the risk in each position to a series of ten positions of loss in a row and not destroying the account, instead the account will only suffer a reduction of 20% that, although still painful, can be easily recovered.
Bad, Do not trade all day!
Forex can be negotiated 24 hours a day, but does not mean that it should be traded 24 hours a day.
The reality is that markets move differently throughout the day: at peak times it moves can be large and long; In periods price will be itching around with little sense.