Aug 6, 2008

Why Trade Forex? | ForexGen

Online equities and futures trading have enjoyed exponential growth and widespread notoriety over the past few years in Asia; online currency trading is only now gaining popularity among active traders. Until recently, large international banks dominated the foreign exchange (FX or Forex for short) market, only allowing access via telephone trading to a select few such as large Multi National Corporation, high-net worth individuals, and so on. But now, the tide has turned and finally there are established online trading firms that provide individual investors with direct online access to the largest, most liquid financial market in the world.Trading opportunities in the Forex market deserve serious consideration as a diversification strategy for your portfolio. Only few traders consider expanding into Forex. Why? The reason may be in the simple fact that in Asia, investors tend to be underexposed to foreign exchange. Unfamiliarity typically breeds misconceptions, and foreign exchange in Asia is no exception.Forex a Risky Business?Is Forex as risky as everyone thinks? One way to measure risk is to compare a financial product's risk/reward ratio. If you take the time to compare an investment in Forex to common investments such as equities and fixed income, you will find that from a risk/reward standpoint, Forex investments provide respectable returns and should be considered a viable portfolio diversification tools.As you can see the claims on some Forex web sites, implying that FOREX is a risk-free pastime. No investment is risk-free.In Forex you are trading substantial sums of money, and there is always a possibility that a trade will go against you. With essential education, Forex trader can learn how to trade profitably and minimize losses.Common Misconceptions of ForexMany investors unfamiliar to Forex market may have some misconceptions about the Forex market. One of the most common myths interprets Forex trading as a higher risk component than other investment alternatives. All financial markets involved risks, and only with substantial level of education you are able to minimize the risks and profit consistently.The Forex market is like any other financial market and technical analysis does translate well into Forex. Many technical indicators that are used in other financial market can be apply and profit from the Forex market.ConclusionOf the more than one trillion dollars a day transacted in the Foreign exchange market, an estimated 95% comes from speculative trading. While large international banks are responsible for the majority of this volume, there are retail investors all over the world trading Forex on a daily basis. Without a doubt, investors in the US are behind the curve with regard to learning about and participating in this market. Active traders who appreciate liquidity, strong technical indicators, and a multitude of short-term trading opportunities will find the Forex market especially appealing. But at the very least, trading the foreign exchange market deserves serious consideration as a diversification strategy in anyone's portfolio.