Translated from Russian by Google Translate
1 Сентябрь 2009

Advantages and Disadvantages of Forex

Forex Market - a financial machine, where daily turnover is enormous sums of money. Not surprisingly, their own, without intermediaries, to trade on the currency market does not seem possible. In order to enter the forex, you must use the services of a professional mediator. This is an intermediary broker.


Often, alternative mediators serve different banks. But regardless of whether an intermediary with which you deal with, always be ready for active promotion of trade in the currency market. You will lead the pros and cons of forex. First, of course, be much greater. Moreover, one of the arguments will be the advantage to the forex market shares. Of course, that all the arguments in favor of the foreign exchange market are baseless, since all the existing advantages and disadvantages of forex are of unequal proportion. We will try to give an objective assessment of the foreign exchange market and touch on its main features.

Advantages of the forex market.

1. Clock. If you say otherwise, by trading on Forex, you can always find time to trade, which suit you most. You do not need to adjust to the schedule, both at the same stock market that has a limited time. Forex is open 24 hours a day, and at any time, anywhere in the world there will always be willing to buy or sell a currency.

2. In many forex trading instruments (currency pair). Perhaps it may seem that this is a minus market forex. But really, if a comparative analysis of forex and stock markets, we see that here there is a huge difference. It lies in the fact that the stock markets appear to 200 securities, ie there is a large stock exchange listing category you want to consider. At plenty of forex currency pairs, but they are much smaller. In addition, you can choose any one currency pair to trade.

3. Another feature of the currency market, of which can not be said that this cons of Forex - this is especially the foreign exchange transactions conducted under the «wing» of the broker. All transactions that a client makes through its broker, not subject to commission fees.

This possibility is realized due to the fact that the broker has the ability to automatically due to the difference of exchange rates to profit from all of you committed transactions. It is for this reason, we can safely say that playing in this case, the forex is much easier than the stock market because you will always see how much you lose and how much the broker receives from each of you a perfect deal.

4. Leverage. This tool is present on other exchanges. At the same stock market. But the fact is that forex leverage an order of magnitude higher, therefore, a trader has more opportunities to obtain higher returns from currency manipulation. The market shares of maximum leverage, which can offer - is 1:4. At the same forex leverage provided by a broker, sometimes as high as 1:400, etc.

It is this state of affairs and is the most significant reason many banks lobbying for forex, because the range of fluctuations of the currency market, despite their greater frequency, small. It is for this reason, in this case run without the leverage does not make sense. Leverage simplifies entry into the market, after having seed capital of $ 10, you can perform manipulations with much larger sums of money. It is for these reasons, the leverage is unlikely to be downsides market forex.

Disadvantages of forex market

Despite the fact that we have mentioned above, quite powerful moments, which can be regarded as advantages of the currency market, forex, however, has its negative side. We consider them below. Thus, the disadvantages of the market forex.

1. Forex Market works round the clock. Of course, this is very good as at any time of day you’ll be able to trade from anywhere in Australia or New Zealand. But the fact is that this possibility, when viewed from a different viewing angle, is not so attractive. The fact that the period between the end of the trading session on Friday and the start of Monday may turn to you at this rodeo. And if the classic trader, having worked the trading session, calmly goes to sleep, then you are unlikely to appear this possibility.

2. We have already mentioned the number of trading instruments. In the forex market, they are much smaller. But the balance of pros and cons of forex in this case can be violated (outweigh) in the direction of the stock market, since there exists a compact all currency pairs, their quotes are changed more frequently than quotes in the stock markets.

Hence, very often reliably determine the wave full recovery is not possible. And if it seems that a few individuals. So if you are in this case «catch» at least half of recovery, it can be considered lucky. But this success can be costly (mental, physical, financial, etc.).

And these costs can be significantly higher than in operations with a large investment portfolio. Also, never forget that the forex transactions are carried out with the most liquid asset in the universe - with the money, so existing on the forex risks are much higher than usual, the classical stock. And this is already a minus forex.

3. Brokers on Forex do not take commissions. Yes, on the one hand - this is a significant advantage. But if you thought otherwise, then this factor can make and cons of forex, as the broker lowers your cost of purchases and sales of inflating the price of essential marketing tool. Sometimes it happens that the real difference between the market price and the price that translates the agent will be such that profits will actually be neutralized.

4. The large size of the leverage provided by the broker. Certainly, the presence of large leverage allows you to get more profits, but at the same time and you run the risk of a much larger capital. In other words, with such big leverage can be ruined much faster. Of course, using some specific features, you can hedge, but it, nevertheless, will cost you extra costs and nerves.

5. Huge size of the forex market. Yes, this quality can always at the right time and in the right quantity enter and exit the market, but this also means that the market is subject to high volatility in a short period of time. Having lost vigilance for a short time, you can lose their entire capital. It is for this reason should not be lightly regarded the FX market as a kind of roulette «lucky - no luck». Here are their laws and these laws are often much harsher than in other markets.

As you can see, the pros and cons of forex directly proportional to each other and often one of the qualitative characteristics of the foreign exchange market can be represented in a different light. Therefore, conclusions regarding the advisability of trading in the currency market to do just for you.