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Forex Trading: Margin Usage and Introduction to Hedging
A good rule of thumb for either a mini-account or standard forex
account, is to limit your margin usage for each trade to 5% -
10% of your usable margin.
As an example, if your usable margin is $5000, to trade safely,
limit your margin...
Forex Trading Online - 7 Reasons Why You Should!
Forex trading online is a fast way to use your investment capital to it's fullest. The Forex markets offer distinct advantages to the small and large traders alike, making Forex currency trading in many ways preferable to other markets such as...
Forex Trading - Understanding Commissions, Spreads and Trading Costs
The forex market is quickly becoming one of the most popular markets for trading.
Not only are the experienced traders looking to this market to maximize their trading returns, but many new, individual investors are now able to trade the Forex...
Introduction To FOREX
The Foreign Exchange Market, better known as FOREX, is a worldwide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Daily exchanges are worth approximately $1.5 trillion (US dollars)....
The New World Currency
Do you ever consider the possibility that the money you work so hard for could be gone from your pocketbook in the next few years?
Quicker then you might think, currency as we know it, is changing. Necessity for efficiency is transforming the flow...
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Forex Versus Stocks
Stocks have been a popular investment for hundreds of years. Companies issue stocks to raise capital for expansion and new projects, and each share of the stock represents a partial ownership in the company.
When the company does well and makes a profit, the value of the stocks rise. Stock owners can sell their shares for a profit or hold on to the stock for even more gain in the future. Sometimes companies will issue dividends part of the profits that are distributed to share holders.
Stocks are traded on stock exchanges. Most stocks are bought and sold through brokers who charge a commission or fee for this service. American stock exchanges include the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation System (NASDAQ). Most stocks are only listed on one exchange, although large companies may have listings on several exchanges.
Stocks were traditionally seen as long term investments. So called 'blue chip' stocks - those having proven value over many years - may form the backbone of an investment portfolio. Short term trading is a relatively new phenomenon made possible with the advent of Internet trading. Day traders attempt to take advantage of large daily fluctuations in the market by buying and selling many times in one trading period. It is relatively risky and any profits realized are reduced by broker commissions charged on each transaction.
Stocks may sometimes be bought on margin, meaning that the investor borrows money to buy the stocks. Margin rates are usually around 50% - the investor can borrow as much as half the value of the stock.
FOREX
The Foreign Exchange Market (FOREX) is quite different from the stock exchange. In contrast to the stock exchange, the FOREX is primarily a short term market. Most traders enter and exit deals within a 24 hour
period sometimes within a few minutes. Many FOREX trades can be made in one day without building up a large brokerage fee because FOREX trades are commission free. Brokers earn money by setting a spread the difference between asking and selling prices.
The FOREX is the largest financial market in the world. It is handles transactions worth $1.5 trillion every day. By comparison, all the American stock exchanges combined handle daily transactions worth about $100 billion. The huge volume of FOREX means that it is one of the most liquid markets in the world. There is always a buyer and seller for any type of currency because the world economy relies on the movement of goods from country to country. The stock market is less liquid because participants may choose to hold their investments or move on to other markets.
The FOREX is not located in any one location. Trading markets are located world-wide and because of difference in time-zones trades can be made 24 hours a day, 5 days a week. Trading begins in Sydney, Australia on Monday morning (Sunday afternoon New York time) and continues non-stop until Friday afternoon New York time.
Stock exchanges have more limited trading hours. While it is possible to trade on exchanges world-wide, each exchange is independent and operates for just 7 hours a day. There is no way to buy or sell a certain stock that is only traded on one stock exchange when that exchange is closed.
Other advantages of FOREX? It is more predictable than stocks. It follows well established trends; it allows high leverage typically 100:1 instead of 2:1 on the stock market; and it doesn't require a large investment mini accounts as small as $250 can get you started in FOREX.
About the Author
This article provided courtesy of http://www.daytrader-futures.com
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