subject: Why do Traders Open Accounts on Forex? [print this page] Why do Traders Open Accounts on Forex?
The last 10 years have seen forex (foreign exchange) trading increase massively. Now the forex markets have an annual daily turnover of around $3.98 trillion and the forex markets are 40 times bigger than equities markets and 14 times bigger than government bonds.
But why has forex become so popular in comparison to other forms of financial trading and investment?
First of all, the majority of growth seen in the last 12 years in forex has come from hedge funds. Since 1996, hedge funds started turning to forex markets to profit off by speculating on the price movements of currencies and exchange rates. Positional traders such as these have now been joined by money manager and retail investors who are looking for other ways to invest their money and diversity their portfolio.
One of the biggest advantages of forex trading is that the margins and leverage with which you can trade is much higher than similar forms, such as spread betting. The margins at most forex platforms varies from 100:1 to 200:1 at dbFX. This means that if you deposit $100 you can take up trading positions with a net value of $10,000, or if you deposited $200 than you could trade in currencies up to $20,000 (the rest of the funds are borrowed from the broker, hence the phrase leverage). Leverage is great for investors who know what they are doing because it allows their initial capital to go much further and lead to far bigger profits. In spread betting for example, the margin is usually 10% (or 10:1 maximum leverage). This means you're same $100 deposit would only allow you to hold positions of exposure worth $1,000. This still beats conventional share trading however, where there isn't any margin or leverage at all...
Another advantage of forex markets is that they are so huge and receive so much attention from the media, news sources and trading journals on the internet. The Forex markets are much more predictable and easier to read than the major financial indices such as the FTSE or S&P500. They respond more to fluctuations in the economy, fundamentals and externalities, plus you can choose to specialise in a specific currency or even make scalp trades on them during the right time to make massive amounts of money from their price movement up or down.orders and technical data makes it very easy to trade the fx markets with little risk. There are even now a number of forex bots that you can pay for, including forex tunnle and megazoid. These are automated systems which trade on forex for you by analysing tiny movements in currency pairings and markets, and going back on previous patterns and trends to speculate what will happen next.
Finally, you can also nowadays trade on forex from your mobile/smart phone. This allows you to keep up to date with your trading positions 24/7 and close orders whenever you want without having to be sat at your computer desk.
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