Investors and speculators using the Internet as an investment tool will find that the Forex market
offers several advantages over equities trading.
*200:1 is the entry leverage value. Brokerages will have margin calls set at different levels, exact leverage may vary.
Forex is a true 24 hour market, 5.5 days a week, which offers a major advantage over equities trading. Investors are able to trade at odd hours, thus allowing more flexibility for personal, business and social activities. Whether trading at 8am, 2pm, or even 2am, there will always be buyers and sellers actively trading foreign currencies. Such flexibility allows traders to immediately respond to breaking news and other political factors driving the market.
After hours trading in the equities market has several limitations. In the US, for example, equities traders have access to ECNs (Electronic Communications Networks), also known as "matching systems". These networks are established to provide a method for equities traders to buy and sell amongst each other. Such networks are usually not able to offer as tight of spreads as would be offered during normal market hours, thus most trades are not executed at a fair market price, subsequently there is no guarantee that every trade will be executed.
An investment market with lacking liquidity, or a lack of buyers and sellers at certain times, is often the demise of traders who need in or out of the market without delay. The global network of governments, banks, corporations, hedge funds, and individual traders that collectively drive the Forex market, are in essence, also driving the world's largest network of liquidity. Such high trade volume works to ensure trade execution and the stability of prices, regardless of the time of day.
Leverage is the key to understanding the risk associated with trading the Forex Market, and of course, the potential for gain. Many Forex brokers offer leverage as high as 200 - 1, meaning that $50 of margin would control a $10,000 position in the market (this is an example of a mini lot).
Forex trading is often attractive to investors coming from the equities market because Forex trading offers such high leverage. It is important to understand why Forex brokers offer higher leverage, and of course... the dangers associated with such.
Profit Potential in Both Rising and Falling Markets
Like any market, there is always a buyer and a seller the world of currencies. The potential for profit will of course rally between the buyers and sellers, the longs and the shorts. Trading currencies in pairs offers the advantage of speculation from either side, but it is the volatility in combination with excellent liquidity that offers currency investors a true advantage over any other market. Regardless of the time of day, traders in the Forex market can long or short any currency pair of their choice.
The off-exchange retail foreign currency market (or Forex market) has many differences, as outlined above. However, one of the most significant factors is the element of risk. The Forex market is the riskiest of all investment vehicles and is suitable only for experienced traders. The higher leverage and volatility found in this market increase the traders risk of loss. There is the potential to lose, all or more, of your original investment.
JMI Brokers is a Financial Service Provider Company registered, authorized and holds a Principals license from Vanuatu Financial Services Commission (VFSC) as “Dealers in Securities” to scarry on the business of dealing in securities under license number 15010
"Securities" means (as from the 2012 amendment) - (a) shares in the share capital of a corporation; or (b) an instrument that creates and acknowledges the indebt - securities that is issued by a corporation or a public office including: (i) debentures; or (ii) debenture stock; or (iii) loan stock; or (iv) bonds; or (v) certifications of deposit; or (c) a right, despite whether or not conferred by warrant, to subscribe for shares or debt securities; or (d) a right under a depositary receipt; or (e) an option to acquire or dispose of any security falling within any other provision of this Act; or (f) a right under a contract for the acquisition or disposal of the relevant securities under which the delivery is to be made at a future date and at a price agreed when the contract is made in accordance with the terms of that contract; or (g) the proceeds of Foreign Exchange; or FOREX (h) the proceeds of precious metals; or (i) the proceeds of commodities.
High Risk Investment Warning: Trading foreign exchange and/or contracts for differences on margin carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could sustain a loss in excess of your deposited funds and therefore, you should not speculate with capital that you cannot afford to lose. Before deciding to trade the products offered by JMI Brokers you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading on margin. JMI Brokers provides general advice that does not take into account your objectives, financial situation or needs. The content of this Website must not be construed as personal advice. JMI Brokers recommends you seek advice from a separate financial advisor.
All opinions, news, analysis, prices or other information contained on this website are provided as general market commentary and does not constitute investment advice, nor a solicitation or recommendation for you to buy or sell any over-the-counter product or other financial instrument.