Forex basics: 7 Advantages of trading FOREX.

1. Largest Financial Market

Daily trading volume was reported to be over USD3.2 trillion bases on the report published by Bank of International Settlements (December 2007). A copy of the report is available here. This indicates high liquidity and tremendous opportunities to make money out of this financial market.

2. High Liquidity

Liquidity is the measure of how fast an asset can be converted into cash. Forex market has the highest liquidity as compare to any other money market. There is always buyers and sellers around due to worldwide traders participation.

3. 24 Hour Market

Trading hour in Forex market is 24 hour during weekdays due to time zone difference of countries in the world. It starts from Asia market, Europe market and finally end with USA market. As long as there is a market open, trading can be carried out.

4. High Leverage

Traders are allowed to trade a larger contract value with a relatively small amount of initial margin deposit. This is possible because of the high leverage offered by most Forex broker. Most of the brokers offer maximum leverage of 200:1. 200:1 leverage means for every $1 you have, you are able to trade a $200 contract value. Therefore, when you deposit an initial margin of $500, you are able to trade a maximum contract value of $100,000.

5. Low Transaction Cost

The cost of transaction is basically built into the buying and selling price. There is always a difference between the buying and selling price of any currency pair. Forex brokers get their commission through this difference in price, which is called spread. However, some brokers also offer no spread in their quoted price but charge a minimal amount of fee per transaction.

6. Profit from Both Uptrend and Downtrend Prices

Unlike stock market, the securities only appreciate in value during bull run. Profit can be made from both directions of price movement. When a currency pair is expected to increase in price, just buy (long) the currency pair and sell (short) it when the price is expected to decrease later and vice versa.

7. Highly Predictable Price Movements

Forex market is highly volatile. However, with the understanding of trader's behavior, trending patterns and the help of technical analysis, the price trend is almost predictable. Therefore, just follow the trend that is being predicted and you will not be too far away from success.