Forex Analysis

Why Trade FX?

Foreign exchange is by far the preferred market choice for aggressive traders. The FX market offers unparalleled liquidity, no slippage, market transparency, trending markets, 24-hour access, low to zero transaction cost, high leverage, low account minimums, no bear-only market, and most importantly, above average profit potential.

Enormous Liquidity

The FX market is the most liquid market in the world. It can absorb trading volumes and per-trade sizes that may overwhelm any other market. Trading essentially consists of two parts: opening a position and closing of that position. Liquidity, which is highly correlated with volume, qualitatively evaluates how easily traders can enter and exit positions. A liquid market enables participants to execute large volume transactions with little impact on market prices. On the simplest level, the enormous liquidity alone is powerful enough to attract any investor to the FX market, as it suggests the freedom to open or close a position at will. In addition, technical analysis, the study of price movements, operates better in liquid markets. Illiquid markets make it much more difficult to accurately determine entry and exit points.


No Slippage

Traders in illiquid markets may experience delays and subsequently, suffer from slippage. In these markets, there may be delays in the execution of traders’ orders and thus, market orders could potentially be filled at a different price from the market rate when the order was initially placed. Furthermore, traders may experience difficulty in exiting or selling positions, which greatly compromises the ability to clear profitable trades. In the FX market, there is absolutely no slippage — traders will always get in and out at the price they placed their orders. This is due to the tremendous amount of volume that the FX market generates.


Market Transparency

Market transparency is highly desired in a trading environment. It is a condition in which market participants are able to observe

the detailed information in the trading process. Ultimately, the greater the market transparency, the more efficient the market becomes. The FX market offers the highest level of market transparency out of all financial markets.

Informed traders are better off than uninformed traders because most financial markets could be exploited by those with private information. Traders in all financial markets rely on market transparency because it allows them to see a transparent spread, which enables them to employ their premeditated strategies while still flexible enough to accommodate an ever-changing marketplace. With the transparency of information, traders can exercise their risk management strategies in accordance to their fundamental and technical approaches.



For example, in the case of Enron, inaccurate reporting by officers of the company resulted in the downfall of the company and losses of many shareholders. Markets where this could occur are considered a poor trading market. Furthermore, market transparency ensures the ability to trade from live, executable prices. Markets that do not offer executable prices and force traders to absorb slippage, obviously compromise traders’ profit potential.



Trending Markets

Although currency prices in the FX market may be volatile, they generally repeat themselves in cycles, creating trends. The trends can be analyzed by traders using technical tools. Since technical analysis statistically works better in markets characterized by cycles and trends, traders benefit from this attribute of Forex. The entire premise of technical analysis is based on the study of price movements. Through this analysis, traders can identify trends and capture key entry and exit points at which they should execute their trades and maximize their profit potential.



24-hour Access

Forex is a true 24-hour, 6 days a week, market. FX trading begins each day in Australia and moves around the globe as the business day begins in each financial center — first to Tokyo, then London, and New York.