Many people hold the view that investing in foreign exchange is strictly for the big professional players in the market. However, with the right tools and the right advice any investor with a reasonable knowledge of how the market operates can also participate.The worldwide foreign exchange market runs a $3.2 trillion USD daily turnover – greater than the entire world’s stock and bond markets.
Forex trading has many attractions for individual and institutional investors as well as speculators.Leverage, high liquidity and very low dealing costs are regarded as key advantages, although many organisations have to indulge in Forex trading purely because of the currency exposure implicit in their normal commercial import and export activities.The main risk for any investor lies in Forex’s inherent volatility which can be influenced by almost any global or local political or economic even and it’s liquidity that can make reaction fast and frenetic.
The Yen, for example, fell heavily after Japanese Prime Minister Yukio Hatoyama’s resignation started rumours that his likely successor, finance minister Kam would take a tougher stance in fighting the strength of the Yen.. That drop seemed like small fry after the Euro fell following comments from European Central Bank board member Christian Noyer, who told German business daily newspaper Handelsblatt that: “the exchange rate of the Euro against the Dollar is not unusually low” just a day after the Euro hit a four-year low against the dollar!
Online trading in the Forex market is therefore extremely demanding and traders need to be highly reactive, responding to economic and political events that may force their hands earlier or later than they may have planned.Since the Forex market is “always open” aside from weekends, there will nearly always be an opportunity to react to moves in the markets, but even so strict “stop loss” policies should be implemented to protect your position.
