Forex Trading Features

The forex market is traded over the counter through an electronic network of Banks, Broker Dealers and Hedge Funds. There is no centralized physical exchange like with equities or futures. There are some key advantages to this. One key advantage is that the Forex Market is open 24 hours a day 6 days per week. The hours are from Sunday starting at 5pm going to Friday at 5pm New York Time. The market begins in Australia (Sydney) and continues around the world to the United States (New York).

Because the network of banks, brokers and dealers is so large, liquidity becomes a smaller issue than if you were dealing with some stocks or futures. During normal market conditions getting in and out of trades is a fairly smooth process, with a counterparty or a market maker usually available to facilitate your trade.
Another benefit of forex trading is that since you are not taking positions in companies there is no uptick rule. Therefore you can take a particular currency pair and speculate on it going up or down without any restrictions.

Information and market news broadcasts are broadly available to all traders in the FX Market. Therefore, particularly through the use of technology, the market is fairly transparent to the investor.
In most retail forex dealing firms trading is conducted commission free. However the dealing firm does have a bid/ask spread in place which the client pays in order to facilitate transactions. You can try out forex trading by using a demo forex platform.

When Can Currencies Be Traded

The spot FX market is unique within the world markets. It’s like a Super Wal-Mart where the market is open 24-hours a day. At any time, somewhere around the world a financial center is open for business, and banks and other institutions exchange currencies every hour of the day and night with generally only minor gaps on the weekend. The foreign exchange markets follow the sun around the world, so you can trade late at night (if you’re a vampire) or in the morning (if you’re an early bird). Keep in mind though, the early bird doesn’t necessarily get the worm in this market - you might get the worm but a bigger, nastier bird of prey can sneak up and eat you too…

Why Trade Foreign Currencies

There are many benefits and advantages to trading Forex. Here are just a few reasons why so many people are choosing this market:

• No commissions.
  No clearing fees, no exchange fees, no government fees, no brokerage fees. Brokers are compensated for their services through something called the bid-ask spread.

• No middlemen. Spot currency trading eliminates the middlemen, and allows you to trade directly with the market responsible for the pricing on a particular currency pair.

• No fixed lot size.
  In the futures markets, lot or contract sizes are determined by the exchanges. A standard-size contract for silver futures is 5000 ounces. In spot Forex, you determine your own lot size. This allows traders to participate with accounts as small as $250 (although we explain later why a $250 account is a bad idea).

• Low transaction costs.
  The retail transaction cost (the bid/ask spread) is typically less than 0.1 percent under normal market conditions. At larger dealers, the spread could be as low as .07 percent. Of course this depends on your leverage and all will be explained later.

• A 24-hour market.

There is no waiting for the opening bell - from Sunday evening to Friday afternoon EST, the Forex market never sleeps. This is awesome for those who want to trade on a part-time basis, because you can choose when you want to trade--morning, noon or night.

• No one can corner the market.
  The foreign exchange market is so huge and has so many participants that no single entity (not even a central bank) can control the market price for an extended period of time.
• Leverage.
  In Forex trading, a small margin deposit can control a much larger total contract value. Leverage gives the trader the ability to make nice profits, and at the same time keep risk capital to a minimum. For example, Forex brokers offer 200 to 1 leverage, which means that a $50 dollar margin deposit would enable a trader to buy or sell $10,000 worth of currencies. Similarly, with $500 dollars, one could trade with $100,000 dollars and so on. But leverage is a double-edged sword. Without proper risk management, this high degree of leverage can lead to large losses as well as gains.

Currency Pair

The two currencies that make up an exchange rate. When one is bought, the other is sold, and vice versa.

ISO Currency Codes

USD = US Dollar
EUR = Euro
JPY = Japanese Yen
GBP = British Pound
CHF = Swiss Franc
CAD = Canadian Dollar
AUD = Australian Dollar
NZD = New Zealand Dollar