Forex Is Perfect For Technical Traders

The strong trends that foreign currencies develop are a significant advantage for technical traders. Unlike stocks, currencies rarely spend much time in tight trading ranges and have the tendency to develop strong trends. Over 80 percent of volume is speculative in nature and, as a result, the market frequently overshoots and then corrects itself. A technically trained trader can easily identify new trends and breakouts, which provide multiple opportunities to enter and exit positions.

Interbank Market

The backbone of the Forex market consists of a global network of dealers. They are mainly major commercial banks that communicate and trade with one another and with their clients through electronic networks and telephones. There are no organized exchanges to serve as a central location to facilitate transactions the way the New York Stock Exchange serves the equity markets. The Forex market operates in a manner similar to the way the NASDAQ market in the United States operates, thus it is also referred to as an over-the-counter (OTC) market.

Uncorrelated To The Stock Market

A trader in the Forex market is involved in selling or buying one currency against another. Thus, there is no correlation between the foreign currency market and the stock market. A bull market or a bear market for a currency is defined in terms of the outlook for its relative value against other currencies. If the outlook is positive, we have a bull market in which a trader profits by buying the currency against other currencies. Conversely, if the outlook is pessimistic, we have a bull market for other currencies and traders take profits by selling the currency against other currencies. In either case, there is always a good market trading opportunity for a trader.

Open and trade on Mini Accounts with as little as $300 USD

Many brokerages do not allow you to invest in odd lots, but only in blocks of 100 shares at a time. With many stocks valued at between $30 and $200 that can mean an investment of $3,000 to $20,000, or more. But you can invest in foreign currencies for as little as a $300 USD deposit with mini-contracts. The smaller trade size enables you to take smaller risks. Mini-accounts are intended to introduce you to the excitement of currency trading while minimizing your risk. You can try out the demo account and paper trade or you can open up a mini-account right now and trade for real.

Low Transaction Cost & Virtually No Commissions

In the currency market, you pay no commissions and no exchange fees because you deal directly with the market maker in a purely electronic online exchange, eliminating both ticket costs and middleman brokerage fees. There is still a cost to initiating the trade, but that cost is reflected in the bid/ask spread that is also present in all markets including futures or equities trading. Combined with the tight, consistent, and fully transparent spread, currency trading costs are lower than any other market.

Active stock traders often see substantial portions of the gross profits go to brokers in the form of commissions, and the exchanges in the form of exchange and data fees. While equity brokers may advertise enticing commissions, the spread between the bid and ask is not fixed and may vary with market conditions, particularly with smaller less liquid stocks. This spread can be 3 to 8 cents or more, depending on the time of day, and results in an added hidden transaction cost much greater than the stated discount commission rate. When dealing directly with a market maker, there are no commissions, the only cost to you is the spread, which is fixed and transparent.

*Please note that your broker of choice is compenstation through the spread which varies depending on which currencies you trade and the broker you choose. FX Trainer is not a broker. The spread is the difference between the current bid and curent ask price on a specific currency.

Opportunities In Both Rising & Falling Markets

Trading currency allows traders to earn profits during rising and falling markets. One can just as easily 'short' (sell) a particular currency as go 'long' because currencies trade in 'pairs.' Thus, when you buy a particular currency, you are actually simultaneously selling the other currency in that particular pair. As the market moves, one of the currencies will increase in value versus the other. Of course, it is up to you to choose the correct one to be long or short.*

Leverage

Forex investors are permitted to trade foreign currencies on a highly leveraged basis - up to 100 times their investment. For example, an investment of $1,000 would permit a trade up to $100,000 of any particular currency. A small margin deposit can control a much larger total contract value. Leverage gives the trader the ability to make extraordinary profits and at the same time keep risk capital to a minimum. Please note that increasing leverage may also increase losses.