The choices of available financial instruments for the purpose of speculative trading are extensive.
Individual stocks can be traded either by outright buying, or under certain circumstances, selling, or by purchasing or selling options on them.
The same is true with all the various types of futures instruments with the notable difference that it is simpler to short or sell futures than is the case with stocks. There are also options available on futures and stocks that can be bought and sold simultaneously in various combinations with colorful descriptions such as “Bull Call Spread With a Naked Leg,” or “Iron Condor.”
Rather than trade one company’s stock or one commodity future, traders can also speculate on a basket of stocks with mutual funds and ETFs and there are also futures contracts based on an entire group of equities, the S & P 500 and DJIA being prime examples.
There is also the foreign exchange currency market (Forex) where traders attempt to profit from predicting the change in value of one country’s currency against another’s.
Advice to the effect that an investment portfolios should be diversified notwithstanding, we’re going to maintain that investing is one thing but trading is not investing, it is trading.
Further, we make no claim regarding objectivity. We’re Forex proponents and intend to state the case, should you find that your time and finances dictate a choice of one financial instrument to the exclusion of others, that FOREX is the prudent, logical choice.
An average of four trillion dollars a day is traded in the Forex markets.
This amount dwarfs any other exchange in the world. In fact, the New York and Tokyo Stock exchange’s combined with the total volume of the Chicago Mercantile and COMEX exchanges do not equal the dollar volume of the Forex markets.
What this means for traders is that the Forex market is extremely liquid, that is orders to buy or sell currency pairs in pretty much any quantity are executed instantly. There is no delay waiting for a willing buyer or seller to make a trade happen.
It also means that no single trading entity, whether it be a major world government, powerful international bank or corporation, or billionaire high rolling trader can control a currency market to any significant extent.
The important conclusion here is that the smaller retail trader can compete on a relatively level playing field.
The Forex market trades 24 hours a day
There are no open outcry trading pits held at a physical location as with the world’s stock and future exchanges.
Forex trading is entirely electronic.
Without a trading pit where the locals and institutional traders can see each other and can gain the advantage of seeing major trades about to happen while the home-based computer screen trader can only react to, rather than anticipate, major trading events, Forex traders all see price data at the same time.
True, there is some after hours trading done in stocks and futures, but trading volume is light, meaning that there will be few, if any, price trends worth trading.
Forex trading sessions are based on business hours of the world’s major financial centers. There are sessions based on the time in Sydney, Australia, as well as Tokyo, London and New York.
One piece of advice we will supply to close the second argument in favor of Forex trading would be to tell you to get familiar with Greenwich Mean Time (GMT) and its relationship to your time zone. You will soon learn that even though Forex trades 24 hours a day, five days a week, there are several hours in each trading zone that overlap session hours from another zone when trading activity will be at its peak.
This offers traders the benefit of there being active trading periods to match any trader’s schedule.
There are over 200 world currencies to trade.
This should put to rest any quibbling around the need for portfolio diversification.
If some currencies are losing value, others will be appreciating.
Pairs can be formed from various currencies and in almost infinite quantities, so a trader can have enough diversification to satisfy any need.
Forex contracts never expire.
Simply explained, this just makes Forex trading easier to manage.
Time is not working against you as it does with stocks and futures contracts and options that expire at regular, predetermined intervals, often before prices make the desired anticipated move.
A currency pair can be held for any desired length of time.
We hope these four benefits are sufficient to convince you that if a choice must be made, Forex trading makes sense.
No other market offers the liquidity and protection from market dominating traders and insiders, along with the time flexibility, low start up costs, multitude of trading choices and simplicity that Forex trading offers.