the world's largest financial market, with over $1.5 trillion USD
traded daily, where does it go from here?
A1:The FX market is
unique, in the UK there is no central exchange, we trade via the inter
bank market. With more and more private individuals taking up margin
trading and new forex brokers setting up, I can only see the market
grow in the near future.
Q2: Other than great liquidity, what are the principal benefits attached
to the forex market?
A2: There is less to consider when trading the forex markets, there are
only a number of variables that affect the pricing.
Main advantages include
Forex Market allows 24 hour trading
Greater leverage - with most brokers offering 100 - 1,
Less starting capital required,
More
Liquidity - day trading has to have enough volume to make it worth our
while. The currency market is more liquid than all the world stock
markets put together. Currencies are always in action,
Free trading systems
Better
for shorting - There are artificial controls built into the market to
prevent it from going down too fast. The reason is that we live in a
biased world that likes to see things go up instead of down. One of
these artificial contraptions is the "uptick rule," which comes into
play when shorting stocks, making it more difficult to sell a stock
short than to buy it. This is unheard of in the currency market.
Selling currencies short while day trading is just as easy as buying
them.
Ideal for Short Term Traders -
Q3: Limited market
access, liquidity issues-after market hours, commission fees, capital
requirements and short selling/stop restrictions are just some of the
issues investors face when considering other markets. Given that the
forex market removes many of these traditional barriers and therefore
does not restrict the forex traders' ability to make a trade at the
right time, are we likely to see an increase in trading volumes this
year?
A3: With all these advantages, traders are finding it hard
not to trade currencies, online trading volumes across all products is
increasing at a substantial rate, however FX trading, predominantly
amongst retail investors is becoming very popular.
Q4: There is
stiff competition amongst online forex service providers for retail
forex traders with some claiming to offer the same degree of technical
analysis enjoyed by the world's largest banks and institutional
traders. Is this possible?
A4: Technical Analysis has come a long
way, more and more forex provides now have partnerships with firms who
provide analysis. However the banks still have an advantage, the
markets are still not under perfectly competitive economic model. The
banks will always have access to information that is not readily
available, ISX FX currently sources its information from a number of
banks to fill this gap.
Q5: Do you subscribe to the theory that forex is less volatile than stocks
because the market is much deeper?
A5:
As a bet on the direction of a national economy, no currency has ever
dropped 25 percent in a day, or imploded as rapidly and completely as
an Enron or a Parmalat. In the wake of those scandals, many companies
are meting out information more cautiously, making it harder to get the
real "scoop" on stocks one problem of trading with too-high leverage is
that one piece of surprise news can wipe out one's capital. If you
treat forex trading like a business, including proper money management,
you have a better chance of success."
Q6: U.S. interest
rates-decade lows; global trade wars and terrorism fears have dominated
the headlines recently. What impact has this had on retail volumes?
A6:
The above factors have all led to a decline in the dollar. This coupled
with tighter regulation of brokers has given investors more confidence
in brokers. Also the stock market crash has driven individuals to look
at the profit opportunities offered by forex.
Q7: Stateside the
Commodity Futures Trading Commission (CFTC) has brought 58 actions
against firms, since its new powers were awarded in 2000. Given that
certain brokers continue to abuse the system, with investor money
sometimes not being traded in the markets promised. What can investors
do protect themselves?
A7: The retail forex market is in essence
betting, as with any bookmaker there is always a risk that you will not
get your winnings, or the odds will be highly stacked against you. With
tighter regulation and increased competition, this risk of default has
largely disappeared. The risk of price manipulation still exists and
this will never really go away. Investors need to ensure that they have
an independent price source and trade with a broker who offers true one
click dealing.
Most brokers work on the basis of the law of large
numbers, acting like the bucket shops of 50 years ago, they do not
hedge any positions and are directly competing against there clients.
This will always lead to price manipulation and further actions by
authorities will inevitably be taken.
Q8: What is this best way for "currency rookies" to get involved in the
market?
A8:
Like with any new form of trading you need to know what you are doing,
especially as there is margin involved. Take all the time you need to
learn this new trading skill well -- practice everything you learn with
a demo account before you consider going 'live' with your own money.
Investors should read books, attend seminars and paper trade until they
are comfortable with there strategy.
About The Author
Rafik Patel C.E.O. ISX FX LIMITED.
No comments:
Post a Comment