8 REASONS TO TRADE THE FOREIGN EXCHANGE MARKETS

8 REASONS TO TRADE THE FOREIGN EXCHANGE MARKETS

1) IT IS GLOBAL AND THE MOST LIQUID MARKET IN THE WORLD CONSTITUTING $5.3 TRILLION IN MARKET VOLUME DAILY

On any given asset class – what you should be looking for is a significant, yet considerable amount of liquidity. As mentioned above, the FX markets constitutes $5.3 trillion US Dollars traded per day – 5 days a week. Given this kind of liquidity, we have institutional reinforcement back of our trades – with off course the correct approach.

2)   ISN’T AS MANIPULATED AS STOCK MARKETS

This is crucial, and it also links back to liquidity. The Dow Jones averages 229 – 89 million a day –  which can not even compete the Foreign Exchange markets daily volume (even when calculating other index’) .With this being said, it is easier for individuals investors and off course large firms and institutions can easily and (very frequently) manipulate the price of the stock markets – which off course constitutes the Dow Jones, Japan 225, UK 100 and many other Indexes.

3) IT DOESN’T CLOSE THE WAY STOCK MARKETS DOES – WE AVOID 98% OF SLIPPAGES

The stock markets has a closure period each day. This time is usually 11pm London, GMT. At these closure periods, there are off course market participants embedding their orders into the markets. Japan 225 actually opens up first at 00:00am London Time. On occasions of significant amount of market orders during the closure period, results in a minor or major slippage, which can either present itself after weekends or on the re-open of a new day of that specific index in question.

4) YOU PAY THE CHEAPEST SPREADS

The volatility on the Index markets is quite significant, however the spreads your paying will be much higher than that which you would pay when trading a typical FX pair – ie, EURUSD. The cheapest spread on EURUSD is 0.5.

5) ECONOMIC RELEASES

On the FX markets, we have a economic calendar which is modified and updated each week. This calendar is beneficial for us due to the fact that we can assess the times in which key economic releases will be released – most crucially, what nation (currency) in particular it will impact as a result. This calendar will facilitate the process of understanding times of FX volatility – naturally you would be inclined to not be in AUD related currency pairs when the Reserve Bank of Australia are releasing their monetary policy.

6) MARKET CORRELATION

The FX markets is one big interconnected web. Market correlation is something that will surely increase your trading performance for sure – once implemented correctly.

 

There are FX instruments, which are negatively and positively correlated with each other – you can simultaneously enter into all of these instruments that are inter-twined – with the intention of maximising your profits (in a educated way)

7) SUPPLY AND DEMAND

Due to the law of supply and demand – we can trade in a very educated way. Net supply will naturally lead the currency to diminish – conversely a net demand will lead to an appreciation of the currency.

Once this knowledge (amongst other factors) are taken into consideration – it will improve your trading performance.
Supply and demand are more significant in the FX markets as we always have two currencies in every transaction.

8)  LONGEVITY

Let’s face it. Both FX and Index instruments have quite a lengthy history since they begun. The Stock markets begun in 1817 – New York. This does sound like the stock markets has been around for long time since we’ve breached 200+ years. However, the first paper currency actually begun in 1690 in the United States.