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Foreign Exchange As The Trader’s Alternative

While online equities and futures trading have enjoyed exponential growth and widespread notoriety over the past few years, online foreign exchange trading is only now gaining popularity among seasoned active traders, commodity trading advisors (CTAs), and other professional money managers. 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 Fortune 1000 companies, large funds, 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 access to the largest, most liquid financial market in the world.

WHY FOREX?
■ 24-hour trading: Traders benefit from the ability to respond to breaking news immediately, day and night.
■ Superior market liquidity: More than one trillion dollars are traded every day in the FX market. The sheer volume of this market helps ensure price stability, as well as less gapping and price slippage.
■ Narrower dealing spreads: Normal bid/ask spreads are five pips or less, much tighter than a typical stock transaction.
■ No uptick rule: It’s easy to establish both short and long positions.
■ Increased leverage: Firms offer traders a 2% margin, compared to a 50% margin for equity markets.
■ No commissions or fees: Overall, FX has much lower transaction costs than equities or futures — an important point for active traders.

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